Q3 2022 Matthews International Corp Earnings Call

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Greetings and welcome to Matthews International third quarter fiscal 2022 financial results conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Bill Wilson Senior director of corporate development.

Please go ahead Sir.

Thank you Vikram.

Good morning, everyone and welcome to the Matthews International.

Third quarter fiscal year 2022 financial results Conference call. This is Bill Wilson Senior director of corporate development with me today, Our board of Lacy, President and Chief Executive Officer, Steve Nicola Chief Financial Officer.

Before we start I would like to remind you that our earnings release was posted on our website www Dot M. A T. W. Dot com in the investors section last night.

The presentation for our call can also be accessed in the investors section of the website.

In addition, as a reminder, beginning in the first quarter of fiscal 'twenty two the company transferred it surfaces and engineering products business from the SDK brand solutions segment to the industrial technology segment.

Prior periods reflect this new segmentation.

As a reminder, any forward looking statements in connection with this discussion are being made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Factors that could cause the companys results to differ from those discussed today are set forth in the company's annual report on Form 10-K, and other periodic filings with the S E T.

In addition, we will be discussing non-GAAP financial metrics.

I encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics.

In connection with any forward looking statements non-GAAP financial information. Please read the disclaimer included in today's presentation material located on our website.

And now I'll turn the call over to Jeff.

Thanks Bill.

Good morning.

Our third quarter of fiscal 'twenty, two continues to present us with several challenges that we faced throughout the year, but several new challenges accelerated quickly.

Inflationary pressures in all of our businesses have impacted profitability, while supply chain issues have continued to impact our ability to control the timing of some deliveries.

Additionally, during the quarter, we saw a rapid deterioration of the European market for our packaging business, resulting from the progressively more challenging economic environment in that part of the world.

The economic deterioration in Europe further drove the rapid decline in the euro and the U K pound negatively impacting our reported results.

S. G K also faced with.

It was also faced with a couple of significant in store project cancellations and delays in other projects due to supply chain challenges at our clients or the inability of certain retailers to staff their stores negating the need for in store marketing the.

The combination of these challenges cause our SDK brand solutions segment to report very difficult results. Although these challenges are not the result of client losses or in any way of are making we expect them to impact the balance of the year.

Nevertheless, the remainder of our business has performed well in this difficult environment on a constant currency basis again, our industrial technology segment reported growth and remains on track to deliver a very strong year in.

In 2022 more importantly, despite the combine the continued positive performance our order intake in this segment remains strong.

Several significant orders in our energy business continued to progress well, while growing requests for proposals bode well for the future of this business.

The recently announced acquisition of Odebrecht will add nicely to this segment as they add about $20 million of energy related orders in the previous year as well.

Like us they are seeing strong interest in their product offering which is complementary to our products. In some cases are used by the same customers.

We have great hopes for this addition to our portfolio, which adds significant coding line capabilities to our already proven calendaring and in Boston product lines together, we offer several critical pieces of equipment used in the production of dry electrodes for the lithium ion battery industry.

I remind you that we are the only producers of production level of equipment used in the production of dry electrode technology, a significant differentiator in our and in our embedded in our advantage.

Yeah.

Similarly.

Obrecht like US is seeing strong interest in hydrogen fuel cell production level equipment, we hope to speak about the success of our combined offerings more in the quarters to come.

Although we are yet unsure of how overt will perform the near term our energy business is expected to finish the year strong as orders remained strong.

Similarly in our product identification in our warehouse automation business, we continue to see revenue and profit growth while order intake remained strong.

Hardware delivery delays at several client warehouse sites slowed the installation of our automation systems, thus preventing us from having an even stronger quarter. We expect these businesses to finish the year strong as well since much of the work we perform has to be delivered by the beginning of the next of our next quarter.

Regardless of the timing of the deliveries evidence of the quality of our automation system solutions demonstrable. When you look at our client list and installed base and we look forward to using our reputation and success to expand this business over time. Thanks to the addition of the Rns group part of the old <unk> acquisition.

Our rns brings us both engineering skills and capabilities to increase our service and delivery levels here in the United States, but rns also brings us a much sought after presence internationally, which should help us to expand our geographic footprint there as well in.

In addition, our own this will expand our total addressable market further to include factory automation, where our rns has significant experience and capabilities with some of the world's largest companies.

Inner memorials Asian segment, we continue to have strong execution at all levels. Despite declining casket a desk our funeral home products business saw relatively consistent volumes when compared to prior years.

Our revenues for this business are up over prior year due to price increases, but profitability as dumb as inflationary pressures outweighed the pricing we have achieved as anticipated.

Our cemetery products business, However saw strong volume increases coupled with price increases to offset the rising commodity costs. We expect this business to also finished the year strong, particularly since most of the revenue derived in this business our U S based and that's not significantly impacted by currency.

All in all we are not satisfied with our performance this quarter.

As I have noted however, much of the challenges we faced are geographically concentrated and not of our making.

We hope economic conditions, when we return to a more normal state soon until then however, we remain confident of our businesses in the business and the opportunities before us given the challenges in Europe . However, we believe there are full year EBITDA guidance will be between 202 hundred $10 million.

We hope to do better, but many things remain unclear at this time now let me turn it over to Steve Nicole our CFO .

Thank you Joe and good morning, I'll begin the financial review on slide seven.

For the fiscal 2022 third quarter, we reported consolidated sales of $421 $7 million compared to $428 $4 million for the third fiscal quarter last year.

As Joe just noted European market conditions, and the corresponding impact on currency rates, particularly the euro and British pound significantly affected comparability to last year.

Relative to the reported decrease in consolidated sales of $6 $7 million the unfavorable impact of currency rate changes was $17 $6 million.

Memorial is Asian sales were 10, 2% higher for the current quarter compared with a year ago excluding.

Currency impacts fiscal 2022 third quarter sales for the industrial technologies segment also improved relative to a year ago.

Year to date these segments reported sales growth of 10, 6% and 15, 2% respectively over last year.

On a GAAP basis, the company reported net income of $2 $9 million or <unk> <unk> per share compared to $3 $4 million or <unk> 10 per share for the same quarter last year.

On a non-GAAP basis, adjusted EBITDA, which represents net income before interest expense income taxes, depreciation and amortization and other adjustments.

For the fiscal 2022 third quarter was $46 million compared to $60 million last year.

Lower consolidated sales for the quarter combined with the impacts of higher material costs increased labor and freight costs and higher travel and entertainment expense were the primary factors in the year over year decline.

In addition currency rate changes had an unfavorable impact of $2 5 million on consolidated adjusted EBITDA for the current quarter compared with a year ago.

Adjusted earnings per share was <unk> 58 for the current quarter compared to 91 last year, primarily reflecting the reduction in adjusted EBITDA.

Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share and our earnings release.

Investment income for the quarter ended June 32022 was $59000 compared to $959000 for the same quarter a year ago investment income primarily reflects the changes in the value of investments held in trust for certain of the company's benefit plans.

Interest expense for the fiscal 2022 third quarter was $6 $7 million, which was relatively consistent with the third fiscal quarter last year.

Other income and deductions net for the quarter ended June 32022 represented expense of $448000 compared with $2 $4 million a year ago.

The significant change primarily reflected a reduction in non service pension costs as a result of the settlement of the company's principal pension plan year.

Year to date other income and deductions net for fiscal 2022 represented net expense of $31 $6 million compared to $6 $8 million last year.

The year to date change primarily reflected a significant first quarter charge in the current year as a result of the settlement of the company's principal pension plan.

The Companys consolidated income tax expense for the quarter ended June 32022 was $1 million compared to a benefit of $2 $3 million a year ago.

The unfavorable change primarily reflected the benefit of tax items discrete to the third quarter a year ago.

For the nine months ended June 32020 to the company's consolidated income taxes reflected a benefit of $2 3 million compared to.

<unk> expense of $2 $6 million last year the benefit for the current year, primarily reflected the tax benefit of the first quarter pension cost.

Please turn to slide eight to begin a review of our segment results.

Memorial <unk> segment sales for the fiscal 2022 third quarter were $203 2 million.

Compared to $184 $3 million, a year ago, representing an increase of $18 8 million or 10, 2%.

The growth was primarily the result of higher cemetery memorial product sales and increased pricing to mitigate the effects of inflation current quarter casket unit sales volumes were relatively steady compared to a year ago and U S. Cremation equipment sales were higher.

Memorial <unk> segment adjusted EBITDA for the fiscal 2022 third quarter was $32 1 million compared to $36 $4 million a year ago.

The favorable effect of higher sales was offset by the significant unfavorable impacts of higher material costs, mainly steel lumbar and bronze compared to a year ago as well as increased labor and freight costs and other inflationary cost increases.

Please turn to slide nine.

Sales for the industrial technology segment were $78 $4 million for the fiscal 2022 third quarter compared to $81 8 million a year ago currency rates significantly affected comparability with last year.

Relative to the reported decrease of $3 $4 million in the segment sales the unfavorable impact of currency rate changes was $5 1 million.

Excluding currency the segment sales improved from a year ago, primarily reflecting higher sales for warehouse automation and product identification businesses.

Backlogs and incoming order rates for these businesses continues to be solid through the fiscal 2022 third quarter.

Year to date sales for the industrial technology segment were $239 million through June 32022, compared to $205 million a year ago, representing an increase of 15, 2%.

Adjusted EBITDA for the industrial Technology segment was $11 $8 million for the full year 2022 third quarter, compared with $12 $2 million a year ago Curt.

Currency rate changes had an unfavorable impact of $1 million on the segment's adjusted EBITDA for the current quarter.

Excluding currency the increase in warehouse automation and product identification sales and improved engineering models contributed to the current quarter adjusted EBITDA.

On a year to date basis adjusted EBITDA for the industrial technology segment increased approximately 42% over last year.

Please turn to slide 10.

Sales for the SDK brand solutions segment were $140 $1 million for the quarter ended June 32022, compared to $162 2 million a year ago. The decrease primarily reflected the unfavorable impact of currency rate changes, primarily the euro and British pound.

<unk> and weak market conditions in Europe currency.

Currency rate changes had an unfavorable impact of $10 $9 million on the segment's current quarter sales compared with the same quarter last year.

Year to date sales for the segment were $445 million for fiscal 2022 compared to $458 $6 million last year, the unfavorable impact of currency rate changes was $23 million on a year to date basis.

Fiscal 2022 third quarter adjusted EBITDA for the SDK brand solutions segment was $14 $5 million.

Impaired to $27 million a year ago, the decline primarily reflected the impact of lower sales increased labor costs, other inflationary cost increases and higher travel and entertainment expenses.

Please turn to slide 11.

Cash flow provided by operating activities for the fiscal 2022 third quarter was $11 6 million compared to $14 $7 million a year ago.

Cash flow provided by operating activities for the nine months ended June 32022 was $84 4 million compared to $106 $9 million last year. The year to date change included a $36 million contribution to the company's principal pension plan during the fiscal 2020 to first quarter <unk>.

Connection with the planned termination and settlement.

Outstanding debt was $776 million at June 32022, compared to $763 7 million at September 32021, net debt, which represents debt less cash at June 32022 was $732 million.

And our net leverage ratio was three five based on trailing 12 months adjusted EBITDA.

The leverage ratio covenant in our domestic credit facility is based on net debt.

The increase in debt for the current year, primarily reflected the reduction in operating cash flow and the impacts of higher capital expenditures and stock repurchases.

These increases were partially offset by the impact of the replacement of the company's securitization facility in fiscal 2000, and the fiscal 2022 second quarter, we replaced our existing securitization facility with a receivables purchase agreement that resulted in a corresponding corresponding reductions in our outstanding.

<unk> debt and trade receivables balances.

Approximately 36 million shares were outstanding at June 32022 during the fiscal 2022 third quarter. The company increase increased its level of share repurchase activity as a result of the stock's recent trading values during the current quarter the company purchased approximately.

705000 shares at a cost of $21 $8 million year to date. The company has repurchased approximately one 1 million shares at a cost of $34 million.

At June 32022, the company had remaining authorization of approximately $1 6 million shares under the program.

Finally, the board this week declared a quarterly dividend of 22 per share on the company's common stock. The dividend is payable August 22, 2022 to stockholders of record August eight 2022. This concludes the financial review and we will now open the call to <unk>.

<unk>.

Yeah.

Thank you very much.

At this time, we will be conducting a question and answer session.

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One moment, please widely polling for questions.

We request you to restrict to one question and one follow up.

We have a first question from the line of Danielle Memorial with CJS Securities. Please go ahead.

Thank you good morning, Joe Good morning, Steve.

They didn't start with with SDK brand solutions, maybe just talk about the cadence of and obviously a lot of headwinds and challenges this quarter the cadence of margin recovery.

How long you see that it will take playing out and maybe some of the steps that you can take in the coming quarters to get back to where we were you know maybe a quarter or two ago and a quick follow up or two thank you.

Sure. So when we look at SG Keg, Dan as we've said in the call. It two principal areas.

That we had the issues with one.

The largest part of it is Europe .

We are faced with two challenges one currency, which we don't control and we don't know when or how that's ever going to come back.

Or even or for that matter, whether it gets worse.

The other part of it was just flat out drop off of volume.

Again, we noted that we do not we did not lose any any accounts whatsoever theres just been a drying up of activity and economic activity in that part of the world.

So we would expect that to come back.

Every one of the clients we've spoken with have suggested this is a temporary pause.

And that would come back when things get a little bit better is it next quarter right now we're not seeing that so.

So I would expect it to be over the course of the next six to 12 months that will get back to a more normalized rate at current acts whenever exchange rate it may be.

It is we are taking actions in the meantime, you'll see some of those come through to reduce the size of our footprint over there.

But at the same time I think that this I hope that this quarter is an anomaly for that part of the world and maybe another little bit of a challenge going next quarter. The second part of the challenge, which is brand in our brand business in store marketing efforts it.

It is really a strange world and you heard my commentary about clients unable with very large clients unable to get products to be able to be marketed as well as others who can't.

Staff their stores in order to be opens are therefore, negating the need for in store marketing efforts.

I mean these are these are unique challenges that are specific to this period of time, we're operating in again clients. There are longstanding very large clients for us.

With reasonable margins that we expect that we'll return it really is whether or not they can get product and it could that could come back as quickly as this quarter it could come back.

In the quarter after that.

It's difficult I mean, I'll give you a perfect example, we had a very large our golf promotion going on across our across the United States at a large retail customer of ours Couldnt get golf clubs out of China to be able to promote canceled.

Canceled.

And that happens precipitously.

They've got to have the product others, who were waiting to get.

Photographs to be able to put on two websites onto ecommerce sites. They couldn't get the product to shoot so we've thought we reduced our volumes there significantly.

This is unique and is not something that is inherent in the business as much as inherent in the operating environment, we live in today.

That's really helpful. Maybe touch talk a little bit more about olbrich, so what you've seen since closing the acquisition and what they kind of bring to the table for you.

First we have not closed we are hoping to close in the next couple of weeks, we signed we announced the agreement we have.

Authorization that the European Union trade authority to to close so we expect that to happen in the next couple of weeks.

But they bring significant additions to the puzzle.

As I've said before we have a longer term goal of adding various component tree to the production line that for the for the equipment used to produce dry electrode materials.

We also can use it for wet electrode as well.

As you read more than we do I'm sure.

Both the United States and the European Union are highly focused on trying to bring that onshore.

We think we are the leading player in leading leading options for onshoring.

Particularly when you exclude the Asians.

And at that point in time, we think this is.

Significant addition, they add coding lines and drawing lines things that we don't have where is your critical parts of that process.

And we think that as we integrate that into our business.

We will continue to expand our opportunities either through partnership or through acquisition the ability to deliver that dry electrode material going forward.

When it comes to Rns, which is a small part, but a critical part D. Rns represents a.

Automation engineering group out of the Czech Republic, but they have offices elsewhere in the world. They bring significant skill sets both in the ability to help us get our product our current energy line off the lines and produce those and respond frankly, even technical rfps, which we have a difficult time getting too because of how much is <unk>.

Coming in but as I said to Mike in my commentary the opportunity to expand both footprint and total addressable market in our warehouse automation and basically become factory automation as well. We think this is a big add that we'll see the benefit of overtime, our current warehouse automation business folks.

It was principally in the E Commerce site of the world of the North American markets, bringing that footprint to Europe as well as elsewhere in the world, where rns can help us as well as expanding in North American into factory automation.

We're rns brings tremendous skill sets.

We think it's a win win it's not going to happen overnight as you might expect but it is part of the puzzle that we think we needed for a while.

Very good lastly at least for the moment just in terms of raw material costs on a memorial ovation side, where are we in the press and in the process of no pricing gains catching up with.

With with the raw material inflation, we're seeing and are you seeing any flattening or even declining and some of those key inputs.

That you don't guide that might help margins in the coming quarters. Thanks.

First let's talk about Memorialization margins to help understand what's going on there our memorialization margins. When we look at our funeral home and cemetery products business architectural products as well.

Mains at about 19%.

This quarter, we had some fairly large charge.

Charges in our European Incineration business, where we do waste to energy incineration.

Those projects went negative for us from an accounting standpoint, because we have to if we believe there is a once we are aware that there is a potential loss on a project we need to recognize it at this time several of those projects are large municipal projects that by contract have been going on for.

Quite a while throughout the Covid period, and we're now feeling the impacts of commodity pressures delays and everything else.

Many of those contracts are in negotiation with those municipalities. Although we don't have contractual rights that obligate them to pay us many of them have suggested a willingness to.

Two meters.

Along the way knowing what has happened over the last several years.

And we hope to recover some of those charges going forward.

Can I count on that note, but I believe we will see improvement on that business next quarter and the quarters to come bringing our overall memorialization margin back into that 20 ish range that we have seen historically for a while.

From a direct answer to your comment around commodity side, we are starting to see some reduction in <unk>.

In steel prices as well as in.

As in copper the principal components of a couple of our businesses.

Clearly on the steel side takes a long time to get through but won't see that in this quarter or next but we still continue to feel pressure on the wage side wages and turnover remained significant and a couple of those businesses and we are having to meet that demand going forward.

We're coming up on we've raised prices on that business.

<unk> up into a period of time here, where traditionally there have been.

Nice increases relative to a couple of those businesses. Some we lead and we've been in those cases were principally on the cemetery product side, we have covered all of our material cost shortfalls on the funeral side, we still lag some of that but from a positive standpoint, our volumes on funeral homes remains strong relative to <unk>.

Prior year, despite the declining death so.

Alright, very helpful. I will circle back if there's anything else to cover thank you.

Okay.

Thank you we have next question from the lineup.

<unk> with B Riley. Please go ahead, thank you and good morning, Joe Good morning, Steve.

Good morning.

Joe you touched on in store display on an S. G. K could you give us a sense how the rest of the domestic business for SDK is done.

The rest of North America was fairly fairly consistent with what we expected down.

Relative to prior year modestly but.

Even in North America and for that matter APAC.

APAC and North America were down modestly in most of those modest shortfalls were related to the mix of projects going through so we think as I said this is a day.

Marketing in store marketing effort challenge and Europe , Europe being a huge driver.

The shortfall.

Hey.

Cremation you mentioned are Steve mentioned in his prepared comments our sales are up.

Could you give us a sense as to.

How input costs are affecting that business and that seems to be a pretty consistent grower for you.

It's an interesting situation in that part of that business, we are having.

We're a relatively small player when it comes to some of the components that are used in that particular business, principally burners and electronic controls we have gone through multiple suppliers trying throughout the COVID-19 period trying to.

Meet the demand that we have out there.

No.

That period prices have escalated materially we've had obligations to kind of substitute that at the same time, we are having.

Covid outages people not coming to work as a result of that a significant turnover, but one of the most important parts of this has been that we have had situations, where we are unable to pass along the price because a well run business like ours gets paid before we ship product and <unk>.

With America little difficult to raise your price when I've already paid for it. So thats one of the challenges we're having in North America. The U K side of it I just mentioned to you is having the challenges from a performance standpoint related to several relatively large projects. We hope those begin to turn from a positive standpoint.

Incineration business continues to get a lot of demand and as we kind of get through this struggle that we're dealing with which has really been lingering since COVID-19 started in that part of the world for us.

This business will be a nice add and continue to grow as you've seen them.

Great.

Thanks, Joe.

Thank you we have next question from the line of Justin Bergner with.

Gabelli funds. Please go ahead.

Good morning, Joe Good morning, Steve Good morning, Bill.

Good morning.

I guess I wanted to start and just maybe ask a little bit about the performance sequentially I mean, if I look at the performance sequentially U.

S G K looks a little bit down in terms of sales and a little bit up in terms of EBITDA. So are you trying to suggest with the guidance that you know maybe as teekay looks a little bit light this quarter, but the real weakness is going to come in the fourth quarter, and then I guess Conversely.

Industrial technologies.

It looks kind of flattish sequentially in terms of revenue and down in terms of EBITDA.

Are you, suggesting there that some of the headwinds are temporary and timing related and that's going to sort of bounce back more in the fourth quarter.

So, let's take let's take that in two parts. So when it comes to S. G. K, we're expecting the currency as an aside.

We really don't know where currencies going Justin.

If you look at the Euro drop and the precipitous this over the matter of 40 days.

Decline you see is that going to stop or is it going to continue difficult to tell but S. G. K I would tell you that it is not we don't expect it to get worse, that's not in fact, we hope it gets better here over the course of the next quarter or two as we move into the balance sheet from a sequential standpoint.

On the industrial side currency again remember when we look at industrials, we break that into two parts, which is our <unk>.

Industrial automation segment as well as our energy surfaces and energy business that we have on the other side.

The energy business is and surface all European for the most part.

Currency took that down on a year over year revenue basis, when we look at going through the next quarter, we expect both our industrial automation and our energy business to be strong.

And be up for the quarter so.

Our guidance reflects frankly, a couple of things when we look at year over year, we're expecting currency to hit our bottom line $567 million from what we can tell today.

And that's what we don't know and then coupled with that a challenge for this quarter that we saw particularly in S. G. K. We don't think that's going to it's not like we're going to pick that back up next quarter.

Does that help you.

Yeah that does help so maybe you could just talk a little bit about some of the headwinds you've felt in industrial technology in the third quarter. You mentioned some delay delays maybe in the warehouse automation side, the margin looked a little bit light sequentially.

Well Theres, two things holding us back a quarter.

Sure, let's talk about the warehouse side on the warehouse side. The challenges that we've had we've got a lot of backlog a lot of orders in house, and we're going to be able to deliver that the issue that we hope to be able to deliver that this quarter again. We've said this in the past if Mike client can't get hardware and Thats conveyors pickers orders things of that nature.

That are not dependent on us.

If they can't get those installed we can't install our automation systems and Thats, what we saw a little bit of up this quarter. We expect based on what we know today to be able to deliver those solutions or at least on a percentage basis deliver those solutions. This quarter because most of those projects that we have in the works out to be.

They have to be completed before the Christmas season, So I expect that we are.

Knowing to see.

An improvement on a year over year basis, and our industrial automation business.

And that's based on what we have in house today on an energy side, we were down this quarter, we were currency exacerbated that at being down but that's timing look. These are these are very very large projects. Those very large projects are recorded on a percentage of completion.

<unk> basis for revenue recognition and profitability, we expect those.

Those projects to time out.

Prove over the course of this quarter and we will then begin to fill the backlog again.

We expect a better quarter on our fourth quarter.

For this business as well.

Okay, Great. Just finally on that I mean, the sequential revenue I guess industrial technology was flat sequentially EBITDA was down was there a mix component to that or anything.

One time related.

Worth highlighting.

Jonathan could you repeat that real quickly again I missed the first part of that if my if I read the numbers correctly. The industrial technology revenue was flat sequentially, but the EBITA was down.

Actually and I was just wondering if there was anything mix related or one time headwinds. It was a tough quarter last it was a tough comparison from last year, Steve I have a comment to it might give you a little bit more detail, yes, just and actually that's the currency because of the mix.

Currency hit us harder than adjusted EBITA that quarter, there was a million dollar impact.

Year over year, just currency related in that business. So if you put that $1 billion back to the bottom line.

Thank you will true up.

On the comparability better we can't overstate what is happening in Europe , both from a currency standpoint, and from an economic standpoint.

Okay, Great and then just I'll throw one more in which is.

Can you say anything more specific about orders and backlogs on the industrial technology business I know you don't sort of quote a backlog number but.

Just to get a sense as to I'll.

I'll give you a perspective on the industrial technologies a whole group.

We are still sitting at.

At six to eight months worth of backlog I mean, it is a significant backlog at this time and orders continue to come in on the energy side, which is the most I would tell you. It has significant impact given the size of the potential projects, we're having difficulty keeping up with request for proposals.

It's that kind of.

Of situations now given the size given the scope and given the.

The type of technology, we operate in these are not decisions that are made overnight.

Often would lie to you that we might have a quarter that is comparatively significantly different than prior year, but it doesn't change the demand outlook for this particular business we have significant interest in it one of the reasons we acquired over it is not just.

The complementary product line it adds but it is the capacity to help us move through these orders more quickly that they bring.

Okay, great. Thank you.

Mhm.

Thank you we have next question from the line of Daniel Moore with CJS Securities. Please go ahead.

Yeah, just quickly Steve thoughts on free cash flow expectations for the remainder of this year and how you see fiscal 'twenty three shaping up if not specific numbers just kind of broad strokes. Thanks.

Youre welcome Dan free cash flow.

The fourth quarters should be somewhat comparable to a year ago, but we are just so you know we are spending more.

With respect to capital expenditures this year, if youll recall.

During during the Covid period fiscal 2000, 22021, we really worked on on.

Constraining capital and candidly other spend.

During that period of time, so you have seen in our results year to date and I expect.

And that to continue into the fourth quarter.

Secondarily during the year, while two things we've been our inventories have been building. This year I expect a little bit of that to continue into the fourth quarter as well.

Commodity costs as you would expect those input costs also impact value of inventory, but also as we recover from Covid. We are building back to more normal levels, particularly in our Memorialization business.

So I would tell you those are the factors. In addition to adjusted EBITDA that we will have the impact on operating cash flow into the fourth quarter.

With respect to free cash flow.

I do expect us to still remain active on share repurchases, but given the level in the third quarter and given the level in the third quarter I expect we will be <unk>.

Turning our attention back to that in the fourth quarter.

Got it thank you again.

Okay.

Thank you ladies and gentlemen, we have reached the end of the question and answer session and.

And I'd like to turn the call back to Steve Nicola for closing remarks over to you Sir.

Vikram. Thank you we'd like to thank everyone for participating in the call. This morning, and we look forward to our fourth quarter earnings release and conference call in November . Thank you and have a good day.

Thank you very much Sir ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Yeah.

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