Q2 2022 Mirion Technologies Inc Earnings Call
Greetings and welcome to Maryann technologies incorporated fiscal second quarter 2022 earnings 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 tell us.
Phone keypad. Please note. This conference is being recorded I would now.
Now I'd like to turn the conference over to Alex Scotty Vice President of Finance and Investor Relations. Thank you you may begin.
Good morning, everyone and thank you for joining <unk> second quarter 2022 earnings call.
A reminder, that comments made during this presentation will include forward looking statements and actual results may differ materially from those projected in the forward looking statements.
Factors that could cause actual results to differ are discussed in our annual report on Form 10-K, and quarterly reports on Form 10-Q that we filed from time to time with the SEC under the caption risk factors and in other filings with the SEC.
Quarterly references within todays discussion are related to the second quarter ended June 32020 to.
The comments made during this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles.
A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the appendix of this presentation accompanying the call today.
All earnings materials can be found on <unk> IR website at IR Dot Dot com.
Joining me on the call today are Larry Kingsley Chairman of the board.
Tom Logan, Chief Executive Officer, and Brian Shopper, Chief Financial Officer.
Now I will turn it over to our chairman of the Board Larry Kingsley Larry.
Thank you Alex good morning, everyone.
We're grateful for your continued support of Marion look forward to discussing our results and outlook with you. This morning.
Earlier today, we published our earnings results for the second quarter of 2022 and reaffirmed our guidance for the full year.
So you get started I'd like to commend the Marion team on delivering another quarter of solid results in what continues to be a dynamic operating environment.
As we previewed a few months ago, the supply chain remains a focal point in the second quarter.
Overall, the condition of our supply chain has shown signs of improvement with continues to be a very dynamic situation.
That situation has been further aggravated by the short term revenue mix shift as a result of canceled Russian and eastern European content.
Tom and Brian will update you on the specifics, but again the team is managing well given the situation.
The order inflow during the quarter was very robust across most of the business and indicative of strong market positions in both of our operating segments.
That strong order performance paired with the overall supportive macro trends across our end markets bolsters, both our near and medium term revenue projections.
We remain confident they will we will deliver on our second half expectations.
While the macro economic environment will provide many with significant headwinds for the back half of this year and for fiscal 'twenty three.
Tom and I remain resolute in our belief that looking forward, we have the best market environment for our combination of products of any recent period.
And that coupled with the team's ability to deliver the results ensures our confidence in a very healthy growth outlook.
I'll now turn the call over to <unk> CEO , Tom Logan Tom.
Larry Thank you and good morning to everyone to get things started I wanted to say thank you to all of my Maryann colleagues for your continued hard work and determination during the quarter your dedication and tenacity in overcoming the challenges our businesses face over the last few quarters is commendable and you should all be proud of the role you've played in delivering the results.
We reported this morning.
There are a few key areas of focus that I'd like to highlight coming out of the second quarter first we delivered outstanding order growth in the first half Notching of 25% increase from the same period last year with both medical and industrial contributing strong increases.
Supply chain and unfavorable order timing dynamics concentrated in the industrial segment had a meaningful impact on the quarter overall.
We were encouraged by medical performance in the quarter, noting that this segment was not immune to those noted supply chain challenges third we are confident in our ability to achieve our reaffirmed 2022 guidance, even with headwinds in inflation supply chain and foreign exchange our strong order momentum gives us a high degree of support for our <unk>.
Second half expectations before we get into financial performance I want to spend some time on what we're seeing in our end markets and why we are encouraged heading into the second half turning to slide four you'll see year to date order performance across our end markets. It is clear the trends we've consistently discussed are manifesting in straw.
Our order intake beginning with medical we've seen positive momentum as Covid related health care system impacts have moderated, especially in the U S clinic growth and robust capital budgets have supported the growth in our radiation therapy and nuclear medicine businesses.
While our strong technology advantage is bolstered organic performance and occupational dosimetry.
Regarding industrial and nuclear power are sentiment remains optimistic we have seen strong government and popular support in tandem with elevated natural gas prices all of which have improved the economics of the global nuclear power fleet. This has fundamentally changed the focus of our operators for managing deteriorating marginal economics to one of life.
Extensions and capacity operates Moreover in countries that have been on the fence regarding the future of nuclear power. We have seen pro nuclear shifts in places like South Korea, Japan, Belgium, Switzerland, Sweden, and potentially even Germany.
Newbuild planning has become far more active given instability within the global energy supply and acute price increases faced in all major markets. Moreover, the EU recently classified nuclear power as a green energy source in their new environmental taxonomy paving the way for additional economic incentives for nuclear is agree.
<unk> energy alternative within the European Union.
Our defense and diversified industrial end markets have experienced great progress with key wins in the quarter.
European militaries are ramping up commitments and funding the programs, reflecting the dynamics shift and the threat matrix Maryann defensible incumbent position longstanding relationships and differentiated product portfolio are supporting continued market leadership in these categories.
Order growth has also been supported by new product launches and continued demand for our digital offerings as a company. We are focused on digitizing, our portfolio and offerings smarter and more connected products. We continue to see elevated engagement with our institute of technology within our occupational dosimetry and are encouraged.
By recent engagement around the platform. Additionally, the launch of the links to during the quarter is yet another Prime example of our team's innovative capabilities links to as a digital signal analyzer, which is the world's most advanced full featured multichannel analyzer ever offered.
Want to congratulate our teams on bringing this innovative product to market, our new product pipeline and development remains robust and I look forward to sharing more on our innovations in the future.
I'm also excited to announce that <unk> is providing see IRS Phantom technology for the upcoming Orion spacecraft test a test flight to the Moon.
This unmanned mission is is set for late August or early September with a purpose of ensuring that the space craft can safely carry Artemis mission astronauts to the moon and we're thrilled to be involved.
Lastly, before I turn to results for the quarter I want to keep you updated on the impact of the Russia, Ukraine conflict on our business, we have not seen any additional project cancellations or sanctions placed uncommitted commercial agreements other than the honey <unk> cancellation in Finland previously reported our relationships with customers remained strong.
And we stand ready to satisfy outstanding commitments.
Turning now to slide five to discuss our company wide second quarter results.
We saw positive momentum on the medical side, we experienced order timing and continued supply chain challenges in industrial during the quarter. We've responded by tightening communication with key supply chain partners and are continuing to build a defensive inventory buffer with key book and ship product categories. In addition, we have worked hard to compensate for.
Last Russian related revenue not only within the quarter, but for the balance of the year as evidenced by the very strong order inflow and backlog we reported this morning.
Into the details organic revenue declined by one 7% compared to the same period in 2021 with medical growing by 15, 1% and industrial declining by 9%, Brian will give you more color later in the call, but our pricing initiatives provided a meaningful contribution to results in the quarter delivering nearly three.
5% support to the top line.
Our net price cost relationship to be a positive contributor throughout the second half along with incremental benefits from our strategic cost initiatives Lastly, I want to note that we remain committed to executing on our inorganic growth target of five to 10 points of topline growth each year.
Our demonstrated ability to source and integrate accretive acquisition opportunities is core to our DNA to be clear I'm confident we have a path of achieving our targets while simultaneously working towards our medium term goal of reducing leverage to three times adjusted EBITDA.
Before I hand things over to Brian I want to thank our investors for their continued support our order momentum and the continuation of positive end market trends gives me confidence in the second half of this year and in the future growth of our business with that I will pass the call over to our Chief Financial Officer, Brian Shopper, Brian .
Thanks, Tom and good morning, everyone.
To begin to begin my comments today. Please turn your attention to slide six as we dive deeper into our second quarter financial results.
As Tom stated earlier order growth in the first half has been outstanding where you're seeing the health of our end markets show up in the order book and I am proud of our sales team for executing against our growth goals.
While order momentum has been positive we continue to experience a number of operational challenges in the quarter related to supply chain effects and order timing.
Now get into the details for the quarter total company adjusted revenue was down four 3% and adjusted EBITDA declined 14, 6% compared to the same period in 2021.
On an organic basis, our revenue was down one 7% year over year.
Total revenue in the quarter was $175 8 million with adjusted EBITDA totaling $42 6 million.
Adjusted gross margin expanded by 30 basis points compared to the second calendar quarter of 2021.
Finishing at 51, 6%.
Overall, I am quite pleased with gross margin performance despite volume absorption challenges we.
We are seeing pricing initiatives strategic cost actions and better mix offset it noted headwinds.
It is also important to note that approximately $3 3 million of public company costs are included in this quarter's adjusted EBITDA results.
Which accounts for 190 basis points of margin compression.
Adjusted EBITDA margin contracted 300 basis points to 24, 2% and adjusting adjusted earnings per share was <unk> 13 for the second quarter.
Turning now to slide seven to look at the medical segment.
Adjusted revenue was up 19, 7% and organic revenue grew 15, 1%.
<unk> growth was strong across all three medical verticals.
I'm, especially proud of our nuclear medicine team and realizing the benefits of the integration work at <unk>.
The cost actions now paying dividends.
Medical adjusted EBITDA margin in the quarter was 33, 2%.
430 basis point expansion from the same period last year.
Adjusted EBITDA performance was principally driven by higher volumes cost synergies from integration efforts and improved pricing.
Moving along to the industrial segment on slide eight.
There are two elements I'd like to highlight and this quarter's performance analysis.
First we saw a greater concentration of order volume in the last month of the quarter. While this gave us visibility into the second half it limited the team's ability to convert to convert those opportunities in the current quarter, particularly given the challenging supply chain environment.
Second we transitioned our year end from June to December this year and have seen some natural flattening of the quarterly earnings mix as a result.
And as we have previously discussed.
We experienced a 14, 8% decline in reported revenue year over year with organic revenue declining 9%.
Our industrial team is working hard to transition to the new revenue mix dynamics in the business.
Despite the year over year declines we are encouraged by the progress our teams have made.
Ongoing supply chain interruptions negatively impacted organic revenue performance by approximately 3% in the quarter.
Adjusted EBITDA for the industrial segment was down 22% compared to the same period last year, while the adjusted EBITDA margin dropped 280 basis points to 33% primarily due to the impacts of.
Lower volumes and related absorption absorption challenges as well as timing dynamics offset by better price.
Turning now to slide nine let me take you through our cash position for the quarter.
As of June 30, we had $91 million of cash on hand, and $167 million of available liquidity.
Additionally, we generated $13 3 million of adjusted free cash flow.
This was despite investing in working capital as we ramped up our strategic inventory positions and continue to navigate the dynamic global supply chain environment.
Year to date, we've invested approximately $18 million and inventory to promote internal supply chain stability and deliver on customer commitments, we remain committed to deleveraging the balance sheet through disciplined capital allocation.
Assuming achievement of the midpoint of adjusted EBITDA guidance and meeting the bottom end of the inorganic target range for 2022, we expect the leverage to finish the year at or below four times.
At the end of the second quarter leverage was four seven times, primarily driven by public company costs and lower second quarter industrial EBITDA impacting LTM EBITDA.
Finally, we are reaffirming guidance for the full year, most notably our adjusted EBITDA range of $170 million to $180 million, 4% to 6% organic growth and adjusted EPS range of 44 to 49 sets are unchanged.
Due to the higher higher interest rate environment, we anticipate adjusted free cash flow to end the year at the lower end of our guidance range.
We continue to explore alternatives for offsetting interest rate increases.
<unk> foreign exchange, primarily the euro is expected to be a headwind year over year.
That concludes my prepared remarks, and we thank you for your continued support.
Now I'll turn things back to Tom for some closing comments.
Brian . Thank you I'd like to close with a few key takeaways before we take your questions first the order book performance reflects healthy vertical market development.
As we've discussed consistently over the last few quarters second while this quarter showed challenges in a variety of categories. We have seen improvements and expect momentum to carry into the second half and lastly, we remain committed to our full year guidance and delivering against these expectations with relentless execution. Thank you all for your <unk>.
Today, I will now pass it back to Alex to lead our Q&A.
Thanks, Tom that concludes our formal comments for today I'll turn it over to the operator for Q&A.
Thank you.
Like to ask a question. Please press star one on your telephone keypad.
Tom will indicate your line is in the question queue.
Press Star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key our first question is from Andy Kaplowitz with Citigroup. Please proceed.
Good morning.
Tom or Brian Medical up 15% in Q2, as you know show a nice sequential acceleration.
Supply chain issues now primarily behind you in that segment and could you see a period of an enhanced of enhanced growth versus that sort of 5% to 7%. That's your normal.
Target and then separately also displayed strong incrementals in the segment of over 50% how much of those incrementals are a function of just enhance growth versus the Marion just can deliver on supply chain issues not in they're not impacting the business.
Yes, Andy this is Tom I'll take the first part let Brian address the second but in terms of the supply chain environment for medical I'd say no. We're not out of the woods scenario, where our engagement is at a very high level I am personally directly and significantly involved with discussions not only internally but.
With our key suppliers.
As as Brian and many other senior executives our view in general is that we are seeing a more constructive environment for certain types of commodities, particularly.
Relatively high it takes for us things like led cold rolled steel and alike.
But we're simply not seeing any level of easing yet.
Yes.
As it relates overall two discrete electronic components, so within the medical business there continue to be issues, where.
Essentially what we've always characterized as firefighting, where we will find that there are some components that we source directly or indirectly through our contract manufacturing partner.
Suddenly with short notice or no notice.
As put on end of life or simply unavailable and we have to scramble to find and qualify alternate alternative componentry that will continue even with the results. We reported again as I as I alluded to in my comments that was with a little bit of drag on the supply chain has had the supply chain have been operating at pre.
Pandemic levels.
You know I think our performance arguably would have been higher for the quarter.
I think on the.
The margin side Andy.
A couple of things right.
We've talked about.
Buying biotechs and integrating it with cap attack and you're really seeing that integration come together this quarter for the first time. So I think we're super pleased with where we stand there and.
That will definitely continue for the rest of the year. So I expect I expect to see good incrementals as we as we progress here. The other thing going on is we've always talked about a number of factory closures. One of them is in this side of the house, which was a move we made from the from southern California to Tennessee.
And again, that's that's how that's coming together, it's behind US there's still some bumps in the road, but youre seeing it in the in the numbers and I think the third thing Youre seeing here is price I mean, we got good price in the quarter on the medical side. So I think we're.
At this point there are still challenges, but this team is hitting on a lot of cylinders and a lot of things are coming together for us on the medical side and a very robust way from a.
From a margin and top line perspective.
That's helpful guys, and then order strength is obviously encouraging as seen industrial but the organic revenue declines have accelerated a bit over the last couple of quarters, even if we exclude supply chain. So we know a lot of that is Russia, but maybe you could give us some more color on exactly when better orders translate into better revenue for this segment and reach that mid single digit target you have for 'twenty two.
Because obviously you have to have a very significant swing inorganically to make that target and is it more Q4 loaded.
Yes, I think I mean, it's it's quite obvious when you do the math that we need to start seeing that in in the third and fourth quarter. So the back end of the year.
I think if you.
We're not going to give quarterly guidance.
But yes I.
I think that.
What youll see in the third quarter's performance we've done before.
I think the fourth quarter for sure is a literally a little heavier than what we would normally like to see.
But we need good growth mainly on the industrial side in both quarters.
To hit the numbers I mean, I think it's just math I would.
I think I'd be I'd be a little heavier on the fourth quarter then.
That not but.
But we need we need to deliver execution wise on both on both quarters, Let me just chime in or tag along here to Andy and just remind the listeners that.
Last quarter, we took 4% of our full year revenue out of guidance because of the Russia, Ukraine situation and the fact that we're sustaining guidance.
We have delivered the level of order intake that we have for the quarter.
Flex just how resilient our business model is in house scrapping our team is where I'm incredibly proud of what they've done and when you look through the our internals on the coverage.
Ian its overarching point, yes, we've got a we've got to execute well in Q3 or Q4.
But it's it's in our hands to do that and we've got a obviously a level of confidence that we can perform here.
One more big picture question, and then I'll get back in queue. Larry you made the comment then maybe Larry or Tom can address the comment about having a highly visible longer term outlook into 2003, what's the probability that mean actually resumes more than normalized growth you've targeting of that mid single digits, regardless of whether the global economy slows down and obviously.
I mean, it does have a fair amount of exposure to Europe , but a lot of that exposure is nuclear is so maybe you can give us some more color into your medium term outlook focusing on 2023.
Yes, candidly, Andy I've never felt.
Laurie.
I was just to say just to give you a little bit more color on my comments versus things that I've seen otherwise historically.
The nice thing about Marion is it the longer cycle business generally speaking you do have more visibility than most of what you see in industrial tech kinds of revenue profiles and maryann being really strong order growth as we've now said three or four times already the.
The combination of the fact that we've got pretty decent predictability the macro trends for both segments look really strong in that.
The order book is so strong for sure lead to a really healthy outlook for 'twenty, three but Tom Tom can give you a lot more detail.
Yes.
So just building on what what Larry said.
I've been I've been enrolled here for nearly 19 years and as you and I have discussed Andy.
Literally I've never seen better market conditions than what we have today historically the story of Maryann as spin.
To Larry's point kind of non cyclical long cycle business, where.
We've actually done very well.
Throughout recessionary periods over the last of the last two decades and that is a function of those those longer demand cycles, but when I look at our business overall on the industrial side.
Just to refresh some numbers nuclear power is.
Nearly 40% of our total enterprise level revenue and within that about three quarters actually a little more than three quarters comes from the installed base five years ago. The installed base was struggling marginal economics were poor for a whole host of reasons.
And the focus was on how to manage through those do we need to shut down plants do we need to curtail operations.
And the two things that have changed our number one the political support which has been spawned by a complex combination of de carbonization desire strategic energy supply issues.
Outright pure economics again, a variety of factors that vary region by region.
But then popular support is translated into political support which has provided.
Broad combination of subsidies and or at least benign regulatory.
Constraints for the industry overall, that's been tremendously helpful. But secondly, with the pricing of natural gas, which tends to really drive the marginal price of electricity and all major markets. We have seen a secular change it is not going to go down anytime in the near term and the consequences of all of these factors coupled with the.
The obvious geopolitical issues in Europe .
Our highly suggestive of an environment, where our nuclear power is going to be a very very healthy.
Organizationally or segment for an extended period of time and that generally augurs well for capital budgets and operating budgets in efficiency operates and things that are essentially correspond well with these solutions that we offer beyond that.
Obviously on the military side, maybe on a more short to intermediate term.
Clearly there is an elevated.
New of the threat matrix in Europe , but not only in Europe from a civil defense standpoint, I think the view is that the risks are elevated on a more global basis.
And we believe this is an area where again our solutions can be very helpful to the perceived needs.
Responding to these threats overall.
Beyond that not to not to a filibuster here, but the medical market health continues to be to be strong. We are performing at a higher standard than the bottom line is that when we look at the combination of vertical market conditions, coupled with our evolving capability driven by the.
Evolution of our operating model, which in turn gives us a superior ability to execute we feel pretty good about the future.
I appreciate all the color guys.
Our next question is from Joe Ritchie with Goldman Sachs. Please proceed.
Great. Thank you and good morning, everyone.
Hey, Joe how are you.
All good all good it's Friday.
So my.
My first question, maybe maybe let's let's just touch on the I know you don't want to give quarterly guidance.
But you did make a comment around a lot of the orders coming through in the last month of the quarter.
I just wanted to get a sense for like the.
Like how short cycle or the orders that came through book and ship versus longer cycle like any color that you can give around that.
To provide a little bit more confidence in the in the industrial growth ramp in the second half of the year.
Yes, I think.
I mean.
In a normal operating environment, I think we Tom and I would have expected to see a bit of those those orders that came in June to be able to convert.
That's not abnormal in certain parts of the business.
Just kind of depends on what the the order and product mix looks like.
<unk>.
What I would I think I would say Joe is we have very good coverage.
On the next two quarters, obviously that bill in June from where we sat in say April and May.
And we will see.
How things look and come together here in the third quarter, but the reality is I mean, we're holding our guidance our confidence is high and we believe this is mainly about execution here in the back half of the year versus anything else.
Okay, that's great to hear and I guess.
I remember I think the last time.
You reported you talked about kind of like that like a $10 billion or $10 million 9 billion, sorry, EBITDA out of that from defense and nuclear right.
On the loss ration sales is that still kind of coming through as expected.
Well I would just point you to that orders page right I mean look our nuclear orders this quarter and the first area for the first half right Youre talking about <unk>.
50% up year over year number.
I think I had given some color that I thought.
I thought that would come kind of somewhere out of southeast Asia, and what I would tell you is we're seeing that.
And we're seeing it on the underlying <unk>.
Stalled base for sure.
I think the.
The military side.
We noted here our defense orders. So this is military and homeland security and the fat is up almost is off over 20%.
The other thing I would note just on these order growth numbers. These are on as reported numbers right. So what do you actually theres actually a drag in here from the euro a year ago.
As well so I think on a volume standpoint, we're we're really excited about where we said I would say that our commentary from the first quarter is proving true and it's and it shows up in our order rates very clearly the other thing Joe is sit on the on the defense orders.
The order cyclical cycle is longer than you might think and just to note that.
There's a lot of activity in pipeline and we continue to be very enthusiastic about this segment.
When we get those orders to be able to.
But when we get those orders right, we tend to be able to turn that stuff.
Depending on what the products are pretty pretty quickly so those tend to convert well, but they like the tops point. They take they do end up taking time to come in to the book.
Got it Okay. That's helpful. One last one and Tom I heard you say earlier that there was no.
No cancellations on any of the Russian related project I know that.
Russia out of the guide I remember that.
Yes, there werent any cancellations that that that could be potentially some upside in the second half of the year I'm just I'm just curious how does that kind of playing out relative to your expectations.
Yeah.
I think there is I think the answer to that is yes, there is still upside.
Sure.
I think candidly it's probably.
More than 23 than anything else.
Or more moving into 'twenty three than anything else, but yes, I expect to see some Russian related technology or even direct Russia revenue in the back half of the year I can give you a number because.
It's still pretty fluid, but I think as you think about.
What was in there.
I think we see probably more of that ending up in 'twenty three than maybe coming in the back half of the year, but our order book is great and I think it's nothing but upside for the back end of the year.
Okay, great. Thanks, guys.
Our next question is from Chris Moore with CJS Securities. Please proceed.
Good morning, Thanks for taking a few questions guys.
Maybe can you just provide a little more color around the types of orders youre seeing flow into backlog for.
These orders filling direct demand or are customers, placing kind of just in case orders.
No I think the if you look firstly on the industrial sector, Chris that what you would find is that.
There.
The order pick up and again I think Brian referenced page four in the presentation, just showing what our strong order growth has been has been sector by sector, but clearly in the nuclear sector. There's been a pickup of activity spanning both the installed fleet and and more broadly newbuild activity.
And we expect that candidly to be the new norm that again as plants are making more money opex budgets capex budgets increase and again there are certain tools instrument solutions that we provide that allow plants to run more efficiently run a greater capacity and our expectation is that we're going to continue to see a pick up.
And.
These product categories for us.
As we get into the seasonal added.
Cycle. This fall and then and then thereafter.
So what I would say on the industrial side is that if you look at the the demand no. It's not defensive in nature. It is responsive to secular market changes that's true in nuclear power clearly on the defense side. It is it does not it's not a prospective.
Kind of prophylactic view it as a direct response to immediately perceived threats and the same could be said in general about.
The behavior that we're seeing in life sciences and in other elements of the business on the medical side.
It's a combination of factors part of it is is our improved operational execution and the nuclear medical businesses, we've really gotten our arms around supply chain management and been able to systematically work through so a higher level of backlog than we normally would have carried we still have further to go but we've made great progress there the team is <unk>.
Formed brilliantly.
And on the.
The radiotherapy business.
There we continue to see just very strong performance, reflecting more macro trends, maybe a little bit of still COVID-19 related market recovery, but generally the macro trends are what's what's supporting that business growth overall so.
I guess the summary of all that is that no. We think the demand pick up that we're seeing is is organic.
Organic it is not defensive in nature.
And in.
In particular, we don't see it as being particularly.
Sensitive to recessionary demand patterns in the broader economy I would also just remember that obviously this is not true for the occupational dosimetry side and we do have products.
Different than that but a lot of our product portfolio is $2 30 to $100 per per product and that's a wide range, but the point isn't the range. The point is these are things you typically hold five or 10 on a shelf when one breaks your comments.
Were there.
There is a need and we're fulfilling a need more than a stocking somebody's shelves.
Got it very helpful.
And you just referenced just chemistry, so just year.
Year to date order growth is down 10% it looks like that's more of a reflection of kind of Q1 can you just kind of talk to the trajectory there.
Yes, I mean listen I think the Q2 order numbers.
Solid.
Higher mid single digits, frankly, which is which is very robust compared to how that end market growth. Let's say this all relates to some time. So we did an ERP conversion last year, well before we were even contemplating going public.
Ed.
Yeah.
This business, we recognize orders when we bill and we made some billings in the first quarter that we typically would have made in the fourth quarter of the year before so I think when you get past all the noise.
At the at the half.
We still have kind of mid single digit.
<unk> numbers in the order book and we expect.
Good growth in that business in the back half of the year, where I think we're super excited about some of the opportunities around instead of that.
We're talking to customers about.
Got it helpful and maybe just a little more detail on on.
Pricing initiatives kind of how they will flow into the numbers and.
In the second half.
Yes, I think we said Tom said like we saw three 5% this quarter. That's again, that's a touch higher than I think we are we would have anticipated.
Dissipated so I think that that's continuing to give us broad confidence in it.
Our pricing being sticky.
I think that will continue to ramp.
In the back half of the year and my comments that I said before all true I mean, we think it's 5% in the fourth quarter so right.
Right around 5% in the fourth quarter so.
We're confident in what we're doing we continue to.
To be thoughtful about putting price into the market, where we need to but also doing it on a value based standpoint so.
We feel we feel good I mean price cost is does expand in the back half of the year as we thought so not a whole lot of changes versus versus what we've been expecting I think we're executing well in this area for sure.
Got it thank you and last one for me just maybe a little more detail.
The goal of getting below four times leverage by the end of the year kind of whats embedded in there.
You guys are making me work hard this this call.
Yeah, I mean listen we see.
We the math the math is at the midpoint of our EBITDA.
And.
With a.
With the with an acquisition that could get us.
That would get us to the bottom end of the range, we still expect to be.
To be at or below four times. So yes that means cash generations kind of pick up in the back half of the year.
And we've got to hit our marks on the EBIT side, we got hit the mid point.
Bob.
And.
With the right type of deal.
All of those things coming together gets us there if we don't do the deal.
Obviously that probably.
That number.
Still hold for us so.
Yes, I think we feel pretty good about about getting down there and improving.
That.
We can we can lever up for deals in that lever backed out when we operated well.
Got it I'll leave it there I appreciate it guys.
Thanks, Chris.
We have reached the end of our question and answer session. So this will conclude today's conference you may disconnect. Your lines at this time and thank you again for your participation.
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