Q1 2023 Thermon Group Holdings Inc Earnings Call
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Greetings, Ladies and gentlemen, and welcome to the sermon group Holdings first quarter fiscal 2023 conference call.
At this time, all participants are in a listen-only mode.
A question-and-answer session will follow a formal presentation.
If anyone should require operator systems during this conference, please press star zero on your telephone key pad.
Please note that this conference is being recorded.
I will now turn the conference over to our host, Ivan salem, Vice President F PA and Investor Relations. Thank you, you may begin.
Thank you. Take you good morning and thank you for joining today's fiscal 2023 first quarter conference call. Earlier this morning we sued and earnings press release, which has been filed with the SEC on Form 8-K and is sults available of the Investor relation section of our website. Additionally, SL for today's conference call can be found in our IR website on their news and events. Ir calendar: earnings conference call- Q1, 20 and 20- three. During the call we will discuss some items that do not conform to generally accepted account principles. We have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non-GAAP measures should be considered in addition to, and not as a substitute for, measures of financial performance reported in accordance with up. I would like to remind you that during this call, we might make certain forward-looking statements regarding our company. Please refer to our annual report and recent quarterly report filed with the SEC for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results. Our actual results might differ materially for the contemplated by those forward-looking statements and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as might be required by law. Now I would like to introduce things or preident and Chief Executive Officer for his opening remarks.
Thank you von good morning everyone, and thank you for joining todayate.
thermont had an excellent quarter to start our fiscal year with better than anticipated organic sales growth, record Q1 revenue and bookings, exceptional operating leverage and year-over-year margin expansion. That illustrates the momentum we carried into Q1 from the strong finish to our fiscal year twenty-two.
Our team executed extremely well in the quarter, despite supply chain challenges that persist to serve our customers with commitment and grow our market share. These results were largely driven by continued investments in a winning strategy, strong execution by our thermmont team around the globe and fiscal discipline around cost management.
As part of that growth strategy, we acquired power blanket on May thirty-, first which contributed approximately one million to the top line in the month of June .
We'll provide more details on the acquisition later in this call.
We're seeing strength in North America and a recovery in oil and gas maintenance spending, driving 95.4 million in revenue, a first quarter record growing by 34% over the prior year. quartermore importantly, we saw the team delivered strong operating leverage as compared to the prior year quarter, with adjusted EBITDA more than doubling to 16.6 million and more than three X the rate of our revenue growth.
Free cash flow for the quarter was particularly strong at 10.3 million, which represented the second consecutive quarter of free cash flow over 150% of net income.
Adjusted EPS was 25 cents a share in the quarter. Bring the trailing 12 -month adjusted EPS to $1 in five cents a share for the business and increase of 31% from the prior quarter.
While we are seeing a weakening outlook in Europe and FX headwinds, we're raising revenue in EPS guidance for the full fiscal year, given the strong performance and strong backlog in the business.
Turning now to Slide four on our end markets in the external environment.
To begin, I want to reemphasize the progress we've achieved in our end-market diversification strategy during our fiscal year' 22, with just 40% of revenues- title and gas during the year.
As we begin our fiscal year 23. our investment in power blanket accelerates these efforts to diversify, with roughly 85% of the newly acquired revenues being outside of the oil and gas sector.
These products have a wide range of applications in end markets like commercial construction, food and beverage and general industrial.
Turning to our other end markets, we see strength across a wide range of verticals. In chemical and petrochemical, higher demand has enabled manufacturers to pass on price increases to offset higher input costs, with continued growth, although at a lower rate, in the second half of this fiscal year.
Much of the spending in this sector is related to maintenance and improving utilization and throughput, with some investments in new capacity.
While not at the pace seenene in fiscal year' 22, we see additional opportunities in the power sector following legislation from winterstorm eury, particularly along the Texas Gulf Coast.
We've also received multiple orders for maintenance and refurbishment of a nuclear power plant.
Going forward. We expect the power sector growth to be driven by the transition to electric from other traditional energy sources, as well as the emerging middle class in the developing world.
Rail and transit, although small, remains a growing part of our business, with recent wins in multiyear transit projects and new product launches in class I rail, driving growth.
While nascent. We are also seeing a number of opportunities in green hydrogen emerge and a transition from gas-fired heat exchangers to electrical in heavier industrial applications. That is beginning in Europe .
A significant recovery in oil and gas spinning appears to be underway, particularly related to upstream and downstream maintenance.
These investments are also focused upon the botlenecking, utilization and throughput.
Here in the chart we see that the upstream represents roughly 17% of our end market, with 90% of that revenue tied to recurring materials on the installed base.
These assets will continue to produce relatively stable revenues at attractive margins for many years to come.
Geographically in the? U's and Latin America and Canada remains robust. The Eastern hemisphere is lagging due to some impact in the war in Ukraine and higher energy costs, as well as COVID-19 lockdowns.
Turning now to Slide five on orders and backlog.
We continue to see strong growth on record Q1 orders of one hundred three million, with bookings growing 43% in the quarter and 44% over the trailing 12 -month periodexcluding the onetime contract. Our book to Bill was a healthy one point one six X and has been positive for eight of the last nine quarters.
Although down sequentially, our quotation volume was up 52% year-over-year, showing continued strength in overall customer activity.
Backlog of 165 million is up 39% year-over-year on a constant currency basis and grew 6% sequentiallybacklog is within $4 thousand of a record level that was achieved in our fiscal year 2019, which was also a record year for revenue and adjusted EBITDA.
With that, I'd like to now turn the call over to Kevin for a more in-depth review of our financial results Kevin.
Thanks Bruce. Turning to Page 6, before I jump into the specifics, I want to note we are very pleased with the financials this quarter and it's a reflection of the global team's commitment to driving profitable growth while meeting a level of customer demand that remained elevated past the typical timing of the heating season. We believe demand, particularly in North America, was driven by elevated levels of maintenance this spring and early summer, after deferrals in the 2020 to thousand thousand and 21 time frame.
Revenue in the first quarter was 95 million of 34% versus prior year and exceeding internal expectations. The large one time labor contract contributed one million in new orders and seven million in revenue in the quarter. So, excluding that project, thermont revenues were up 24% versus prior year. As mentioned on our previous call on site work for this contract was completed in May. Fx impacted revenue by a negative two point nine million due to the stronger U's dollar, which we expect to continue to impact our business in the quarters ahead. Revenue is significantly higher in both the? U's Latin America and Canada regions this year versus last, with both regions see and elevated materials demand from our installed base where we realized the combined $14 million of incremental material sales in North America.
While we typically see the seasonality effect in our process, heating business begin to taper off in late March, we observed elevated daily order rates for those products through June , helping to drive the revenue outperformance in the period.
We continue to see progress in our diversified end markets, with power of 85% and food and beverage up 19% year-over-year, while maintenance spending in the oil and gas markets is growing considerably. We are keeping our global sales teams focused on executing against our long-term goal to drive the exposure to diversified markets of at least 65% of total revenues by the end of our fiscal 2020 -six.
Reported results include one month of power blanket financials worth approximately one million of revenue in this period. thir month's overall organic growth was 33% year-over-year. We will discuss more about the power blanket acquisition in a few slides, but we are off to a good start and very excited to have them as part of the thermont team going forward.
Point in time revenues grew 34% in the quarter and 33% in the trailing 12 months, which underscores the strength in maintenance spending across our global installed basis. As a reminder, point in time revenues are aligned with our product or material sales, while overtime revenues, which were up 25% in the quarter and 28% on a TM basis.
Both including the onetime contract, are representative of project work, where we have engineering and installation services.
Over time. Our project revenues represented 38% of total revenue this quarter, versus point in time or material revenues of 62%.
Excluding the large onetime labor contract, this split was 33% and 67% respectively.
Now for gross margins. In SGNA, on Page 7, reported gross margins in the quarter are 39% versus a reported thirty seven point three percent last year. There are few moving pieces in the gross margins to call out in the first quarter, fiscal 2023. the onetime contract had revenue of seven million and was dilutive to margins by 260 basis points.
Giving us a comparable figure of 42% gross margin in FY 23 versus a reported Q1 in fiscal 22 of 37%, yielding an expansion of over 400 basis points.
Volume contributed an increase of 490 basis points, driven by the strong point in time sales in the Western hemisphere.
We continue to be able to manage the price cost equation, with this quarter being a deminimus 20 basis points headwind compared to last quarter's positive 30 basis points.
So essentially flat over the last 180 days.
As a quick reminder, we ded uct depreciation from the fsec reported selling general and administrative expenses to arrive at the sdna on the slidide in the quarter. sdna was 21.8 million, or 23% of revenue, versus a prior year of 18.3 million or 26% of revenue.
On a trailing 12 -month basis, sdna was slightly above 85 million, or 22% of revenue, up from 78 million, or 27% of revenue, in the prior year.
We remain highly focused on managing the controllable spend while investing in our business to drive profitable growth. However, we will continue to be disciplined with investing in the business for the long term and our aggregate sga dollars will increase during the balance of fiscal 2000 and twenty-threewe've continueed the practice of detailed spender reviews to ensure we are directing capital towards the highest returning investments that will help us to scale and diversify the business.
With some economic clouds on the horizon, most notably in Europe near term, we want to ensure we are positioning the business for success and attractive profitability through the cycle.
Moving on to Page eight for adjusted EBITDA and earnings per share.
The combination of high customer demand execution within our installed base, managing the price cost equation in a volatile environment and proactively focusing on base cost management has yielded very positive bottom line results this quarter. This is the strength of the thermonet business model and representative of the execution we expect from the team as we delivered on our strategic objectives.
Adjusted EBITDA was 16.6 million, or 17% of sales in the quarter. Adjusted EBITDA has more than doubled and is up eight point five million from the prior year, along with margin expansion of 600 basis points.
On a trailing 12 -month basis. Adjusted EBITDA is now up to 67 million, along with margins of 18%, an expansion of 280 basis points.
Power blankets. Business is quite seasonal and it is not expected to meaningfully contribute to adjusted EBITDA growth until heating season begins later this year.
As a reminder, we are still projecting a 200 to 300 basis point expansion in adjusted EBITDA margins from fiscal 2022. 16% and our first quarter results are a solid step forward towards achieving that goal in fiscal 2020. -three.
Gap EPS in the first quarter was 20 cents per share and increase versus the prior year loss of one cents per share- and adjusted EPS was 25 cents per share versus last year's four cents per share. For the trailing 12 -month period, GAAP EPS was 80 cents and adjusted EPS was $1: five cents.
On Page nine we'll cover the updated balance sheet.
Cash ended at four million. As we used the combination of available cash and additional borrowings for the purchase of power blanket, our balance sheet remains strong and, after accounting for the acquisition, net debt to adjusted EBITDA ended the quarter at one point seven times, providing the financial flexibility necessary to execute our plans in a still uncertain global economic environment.
Ma remains an attractive capital allocation option which we believe will play a key role in continuing to diversify the business over the next few years.
Working capital results were mixed as the strong collections we typically see in the quarter following heating seasons. Completion was offset by strategic investments in our inventory, particularly raw materials to buffer disruptions we've seen in the supply chain.
On the right side of the page. We continue to generate positive quarterly cash flows, with free cash flow of 10.3 million. In the quarter, CapEx was one point six million and predominantly focused on maintenance. We have a few larger investments in our CapEx budget and expect to invest over one million this year as we begin to invest in our strategic initiatives and conclude some maintenance activities.
A quick update on power blanket on Page 10. with the acquisition of power blanket this quarter, we wanted to pause for a few minutes on the deal, which we are very happy to have as part of the team.
Power blanket was about 17 million of revenue last year, with 85% of those revenues from customers outside of the oil and gas markets.
For their April to June quarter of calendar 2022. revenues were up 15% year-over-year.
The business has a set of patents around heat spreading technology and we believe we can build upon that technology with a high temperature application.
The power blanket leadership team has been incredibly engaged in planning and we are off to a great start with integration. The team is already delivering against our growth plan in the North American distribution network and we had thermont solutions on their e-commerce portal within 48 hours of closing.
We purchased the business for 35 million, or approximately 10 X trailing EBITDA, on a pro forma basis, using cash and borrowings. As mentioned earlier. We believe that 10 months of financial results we will report in fiscal 2023 will contribute an additional 18 million of revenue which will be factored into our guidance going forward. Ebitda margins are accretive to the thermont business and the deal is expected to be accretive to GAAP EPS in fiscal 2023.
This quarter was a great start to the year, with record revenues and significant incrementinal margin expansion. While the external environment may be choppy in places, weak demand in Europe is a particular concern and supply chains are nowhere near the precovided levels of costs or lead times. The thermont team continues to execute against its short and long-term plans and there is considerable runway ahead to improve results from here. I want to thank our team for the collaboration that enables us to deliver for our customers, shareholders and the broader communities where we live and work, and with that I'll pass it along to Bruce for an update on our strategic initiatives.
Thank you, Kevin.
I'd like to now direct your attention to Slide 11 on our strategic initiatives.
In our fiscal year 23 plan we have investments of roughly six million in incremental sdna expense and four million in CapEx to drive growth across these three strategic platforms in the fiscal year.
To capitalize on developing markets. We're expanding our manufacturing capabilities in India to meet leak times and price points for process and environmental heaters in a very fragmented Asia-Pacific market.
While we're off to a slow start in the first quarter due to COVID-19 logdowns, we anticipate 20% to 30% top line growth across the region in this fiscal year.
As noted last quarter, our efforts on diversification have really begun to gain traction, with approximately 60% of our end markets now outside of the oil and gas sector.
The initial focus on food and beverage, commercial and rail and transit expands our addressable market by over one billion.
A new business development manager has been hired to cover the European market where we can leverage our relationships with large OEMs in the transit sector.
And we continue to invest research and development dollars for rail and transit and commercial applications, with new product launches planned later this fiscal year.
Technology-enabled maintenance. Our third strategic platform for growth capitalizes on the digital transformation underway. We've recently updated our genesis network software to monitor and manage third-party controllers, which opens up a wider range of brownfield opportunities.
We've also secured our first Genesis network order in the middle East and, based upon the pipeline of opportunities, anticipate tripling systems sales this year in this fiscal year.
Turning now to Slide 12 to illustrate how thermont solutions are enabling a more sustainable and cleaner future.
There are a wide range of thermont solutions that enable customers to improve their environmental footprint by lowering both scope one and two emissions.
On the left we see the envirodion patented methane destruction unit that converts fugitive methane emissions to co two and water, reducing the greenhouse gas effect by 25 times.
These units are 95% efficient and we have orders for the first 20 to be installed in the field.
This technology helps customers reduce their scope point emissions and are economically attractive due to the impact of the lower emissions and associated carbon tax savings.
On the right we see an example of three and forty-year-old gas fired heaters in a sulfur recovery unit that were replaced with three calorie tech heaters.
These replacement heaters lower both scope point emissions on site and reduce operating costs due to the increased control and energy efficiency of the electrical unit.
There is a large installed base of hydrocarbon fuel heaters across a wide range of industries that are being evaluated for conversion to electric.
While early in the transition. We believe there is a sizable market opportunity to enable this transition in the coming years.
Moving on to Slide 13 in our five -year strategic plan.
In this chart we see the impact of COVID-19 on the business in fiscal year' 21, which is the base year of our five -year strategic plan.
Subsequently we see growth in fiscal year' 22. that was driven by the early stages of recovery in our end markets and successful execution of our strategic initiatives.
With a revised forecast for the fiscal year. We believe the fiscal year 23 revenue estimate of 38 million to 405 million as being on track to us achieve our fiscal year 26 growth objectives.
As part of our diversification efforts, we are also targeting industrial markets outside of the oil and gas sector to represent 65% to 70% of revenues by the end of fiscal year twenty-six.
Finally we expect operational excellence combined with leverage on our fixed cost, returning EBITDA margins to the low to mid- 20% range over that same period.
Turning now to an update on our fiscal 2: 20 tweet: 2020 -three full year guidance.
Looking forward. There are a number of areas of uncertainty in the current macro environment with supply chain challenges, FX headwinds and weakening demand in Europe . However, the positive momentum we are seeing in quotations, bookings and backlog give us confidence to raise our fiscal year 23 full year revenue and EPS guidance, which includes the impact of power blanket our recent acquisition.
Fiscal 2003, revenue is being raised to 38 million to 405 million, which represents 10% growth over the prior year, at the midpoint of the range.
Excluding the onetime contract, in our fiscal year 22 core growth is 17% over the prior year.
We anticipate productivity gains from operational excellence initiatives combined with price to offset inflation for the remainder of the year to improve the EBITDA margin profile in the business by 200 to 300 basis points.
Gaap EPS guidance for the full year is being raised to 85 cents a share to 97 SENS a share, an increase of 52% at the midpoint over the prior year.
We are also initiating adjusted EPS guidance of a dollar seven a share to a dollar 19 a share for the full year, an increase of 37% over our fiscal year' 22, on top of the 150% growth delivered in the prior year.
As I look at this business, thermon has a well-established leadership position with a broad portfolio of solutions.
A large installed base of loyal customers that generates recurring revenues across industry cycles.
An investmentalized business model that generate strong cash flows and certifications across a wide range of industries and geographies that create significant barriers to entry.
The resilience of this business, the global recognition of the brand and the strength of this global team position thermon very well to deliver profitable growth in our fiscal' 23 and beyond.
I'd like to now turn the call back over to our moderator Diego, for the QA portion of our call. Thank you.
Thank you, and at this time we'll conduct our question-and-answer session.
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one moment may please, while we pull for questions.
Our first question comes from John brats with Kansas City capital. Please go ahead.
Mar Bruce Kevin.
Can I get a little bit more color on on on your revenue expectations. Bruce you talk about some of the pluses and some of the negatives and you guess my qu a couple of questions number one How much of a headwind is Europe at this point and.
What might it take to change or to see some improvement in the European, in the European business?
Yes So you know Europe is down. You know modestly, year over year it's really the only area where we've seen know, any contraction. asiaes roughly flat. You know we, we obviously are seeing the impact. You know the war on Ukraine as well as you, high energy prices and just you know some uncertainty in depressed demand. So know, certainly we expect that kind of projecting. You know some of these. You know revenue shortfalls going forward, but you know our, our revised forecast factors in just the strength that we're seeing in the Western hemisphere, U's Latin America as well as Canada. Our business levels are quite robust and and we're also seeing really a recovery in that oil and gas spending that we talked about you know, last quarter John , as being the potential upside to this fiscal year, and certainly in the first quarter we've got a great start to that CE. You talked about the strength in the maintenance spending in oil and gas and maybe elsewhere. What kind of legs to that have can of continue on? For you know the maintenance spending continue on from another 3, four quarters. And then what would your expect expectation be about? Maybe some additional cap capital spending in the oil and gas industry and some new projects moving forward.
It's great question. So you know John , I think as we look at the O gas sector, you know we're seeing very different behaviors in this cycle: a lot more fiscal discipline around new investments in CapEx and really a a focus on, you know, return to shareholders, and so what we've seen here is, with just the demand recovery, and this is upstream as well as downstream- we just see a lot of this maintenance spending and that's been deferred for a couple of years. So you know, I think there's some activity there. But a lot of what's really driving in the just the grounds, well of of activity is really focusing around maximizing the assets that they current have, currently have and de botle ennecking throughput utilization, those types of investments to really get the most out of the capital investments that are on the ground. So just, you know, I think, given the demand, you know kind of the tight supply demand picture that we we see in that's really being exacerbated by the war and Ukraine, we anticipate this remaining relatively strong going forward, even if there is, you know, some slowing of of demand maybe, you know, on on the heels of a recession. So we think this is fairly going to be fairly resilient for, you know, several quarters to come. ok ok, one last question: brce. Obviously there's a lot of talk these days about controlling methane releases and so on, and obviously you talked a little bit about in virod in, and you know you got initial 20, 20 units ordered. two things. Number 1: how big can this business be? And you know what. What are we talking about in terms of revenue on 20 orders? How significant is that?
I mean it. It's less than a million dollars, So it's not a huge order, but you know a question around how big this could be. These are really targeted for use in more remote areas. A lot of this would be in gathering systems, particularly where you don't have the availability of elect electricity and and you have fugitive emissions from you know smaller sources. So this is kind of where this plays bestand. So if you kind of think about it, carbon- carbon tax is is one of the things that certainly a push to reduce scope point emissions are really what's driving. You know this, both economically and just from you know from a ethical and environmental standards perspective. So you know this could be sizable opportunity. There's certainly competing technologies and you know it's not clear what would win today, but this really has some distinct advantages over some of the other alternatives, particularly in remote areas where electricity and some other infrastructure for carbon capture and sequestration may not be available.
Okay all right, Thank you, Bruce.
Our next C comes from Brian drab with William Blair. Please state your question.
ok good morning. Thanks for taking my questions first, Kevin.
marttebra, morning brough.
morningso the revenue of revision just to be clear. So the upward revision is about like.
17 18 million related to power blanket and one million organic. Is that how to think about that?
Yes Brian , you're right on. We think about power blanket, that's the 10 months of revenue will consolidate for our fiscal' 23, plus the call it the upperformance in first first quarter as well.
Right right.
And then you had a nice gross margin improvement.
250 base points or soll year over year.
How sustainable is that do you think as you move through the.
The year you know are we going to. Maybe we had a run rate of two or 300 basis points above gross margin that we that we saw in fiscal twenty two
Potentially.
So Brian , I think when we look at gross margin, leveraging the fixedcosts, and clearly when we see an environment where volume is going to be higher, we should have some of that fall to the bottom line with gross margins. And you've seen over the past couple of quarters we've been able to manage that value gap to price cost equation. I think we expect to been able to continue to do that through the year and there really, what we would point to and where we expect to see some additional value in the gross margins is really the continuous improvement initiatives, the operational transformation that Roberto, since he's joined the team, is really getting a lot of traction, a lot of excitement in the plants, and I don't want to put a number on it specifically, but we certainly think theres more opportunity to come related to the continuous improvement efforts as well.
Okay So you know PRI, but I I will also add to that.
As we've completed the large onetime contract. This quarter is labor only in it's single-digit margin. So as we see that drop off, envision the mix in the next three quarters to be significantly better over what we experienced last year and we also believe that's going to contribute to the gross margin expansion in the next three quarters.
How big a headwind to gross margin was that one project.
cily the has.
Yes it's significant, Brian . If you think about all in it was about 31 million of revenue. That started in Q2 of last year, the bulk of it was Q4 and then this Q1. But the end of the day, as Bruce mentioned, that was a pretty low margin contract and so, as we laped those comps, there's certainly some some upside just on the reported margins as well.
Okay thanks, and that you mentioned on the last calli think.
Was that Russia was about running in about like five million in revenue per quarter thereabouts and then that was going to run off. How much revenue was there from russia- the in the first quarter and how does that run off in terms of time?
Yes I think the numbers you may have been referencing were more kind of the business last year. We we have roughly about close to two million in backlog in Russia. We expect that to kind of run off over the next 18 months. I think we did roughly three million in revenue in the first quarter and we would expect somewhere in maybe eight to one million in revenue in the fiscal year as we, as we execute on those contracts.
ok.
Event.
Just made just the last couple of questions the orders.
orre down sequentially.
From one and 13 million, last quarter one hundred and three, but is that largely season, ality or is that start starting to see impact from Europe ? And so that's my first question.
Yeah So Brian , I mean you know this business where, very seasonal, by far our Q1 is the weakest incoming order rates in. You know in the business and you know in these and I would really point you, you know, quite frankly, sequential bookings and revenue don't really tell you much in this business. You really have to factor it over the prior year just due to the seasonality because it is so pronounced. So you know, I would really point you to the relative improvements year over year and not the sequential order rates and and I would you know that that that it's for every quarter because you know depends some where over, another under, and you can really be misled both directions if you look at sequentials, just due to the seasonality.
Yes Brian , when we look at orders, the CM numbersis where we focus. That's, I think, in the 395 range. At this point of kind of put you right in the middle of the guide as well.
Got it okay, can you last, last we can you just talk at all about what you saw in terms of year-over-year?
Change in orders for North America, Europe and Asia.
Yes So really the bulk, I we said, of the activity was not only revenue but the incoming order rates were really in the Western hemisphere U's in Latin America very strong and really a crow broad base of industrials.
In Canada as well. Really a lot of strength Asia.
thecoming order rate was was solid. But the back, the kind of the pipeline and the opportunities our building in Europe - we do see some weakness EU, -over-year, and a big part of that having having Russia fall off. So some of that we anticipated. But as we really suspended the oil and gas orders in that, that legal entity, So certainly that's a headwind for Europe when we just look at year-over-year comparisons. But we're focused on really driving the incoming order rates in in Western Europe , particularly to to really drive our results and performance this fiscal year.
Okay just neinking one last one on interest expense and it's become relatively minor now, is that?
Is what we saw in terms of interest extense in the first quarter and tax rate for that matter.
Similar to what we should expect for the subsequent quarters in this fiscal' twenty-three.
Yes let me Brian . You've obviously got rising interest rates environment, So as the base goes up, that'll accrue through. But I think you can factor in those types of changes that we don't have control over. betending it's generally indicative of what we expect over the next couple of quarters.
And cast rate come.
Oh was sorry. Yes, same no changes on tax rate as increystalle 26 for the year.
Yes yes okay, I'm seeing 29 effective tax rate in the model that we.
Plugged in today is that was that.
Higher than what you're expectacting for the rest of the year. Maybe I just have a.
Type of.
No I can duouble check that with you, offfline and Brian , but I think for the total year we're still at 26. I think we had some discrete items related to the European operations that might be driving it in the quarter. But let me double check with that we can follow up with you all off on.
ok great, Thank you. Thanks what.
Thank you. There are no further questions at this time. I'll turn the floor back to MR Bruce teames for closing remarks.
Thank you well. Thank you all for joining our call today. We appreciate your interest and investment in thermont. Enjoy the rest of your day.
Thank you. This concludes today's conference. pargmay disconnect. Have a good day.