Q3 2022 Astec Industries Inc Earnings Call
Hello, and welcome to the Aztec Ingesting industries third quarter earnings call.
As a reminder, this conference call is being recorded.
It is my pleasure to introduce your host Steve Anderson Senior Vice President of administration and Investor Relations. Mr. Anderson you may begin.
Yeah.
Thank you and welcome to the Aztec third quarter 2022 earnings Conference call.
Joining me on today's call are very rough elope, Chief Executive Officer, and Becky Weyenberg Chief Financial Officer.
Just a moment I'll turn the call over to Barry to provide comments and then Becky will summarize our financial results.
Before we begin I'll remind you that our discussion. This morning may contain forward looking statements that relate to the future performance of the company.
And these statements are intended to qualify for the safe Harbor liability established by the private Securities Litigation Reform Act.
Any such statements are not guarantees of future performance and are subject to certain risks uncertainties and assumptions.
Factors that can influence our results are highlighted in today's financial news release and others are contained in our filings with the SEC as usual, we ask that you familiarize yourself with those factors.
In an effort to provide investors with additional information regarding the company's results. The company refers to various U S. GAAP, which are generally accepted accounting principles.
non-GAAP financial measures.
Which management believes provides useful information to investors.
These non-GAAP financial measures have no standardized meaning prescribed by U S GAAP.
And are therefore unlikely to be comparable to the calculation of similar measures for other companies.
Management of the company does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.
Comments made during today's call, we'll refer to non-GAAP results and a reconciliation of GAAP to non-GAAP results are included in our news release Andy.
In the appendix of our slide deck.
All related earnings materials are posted on our website at www Dot Aztec industries Dot com, including our presentation, which is under the Investor relations and presentations tabs and now I will turn the call over to Barry.
Thank you Steve Good morning, everyone and thank you for joining us this morning.
I will begin with key messages from the quarter, followed by a brief overview of the business dynamics and then an update on progress made on our continued strategic evolution.
And then Becky will share details on our financial results and capital deployment I will then provide some concluding thoughts before opening the call up for your questions.
Key messages for the quarter shown on slide four starts with market demand has remained robust across our segments, even as general macroeconomic indicators are beginning to soften.
Customer sentiment remains positive and overall order rates for our products are steady.
Sales in the third quarter grew 18% compared with last year with strong double digit growth in both segments and was the highest third quarter sales we have ever achieved.
Put increased higher order rates resulted in backlog growing once again, providing solid visibility as we enter the final quarter of 2022 and move into 2023.
In addition to growing our sales and backlog we are continually focused on improving our business and operations.
This culture helps us navigate macroeconomic challenges sessions in supply chain and labor constraints that have persisted over the last several quarters.
Despite these challenges our team has done a commendable job and we are combating these factors on a daily basis.
Engaging with supply chain partners, including both customers and suppliers to work through demand or supply issues and to better position us to meet customer needs and we were successful in increasing headcount by roughly 9% from the same quarter last year.
We'll continue our diligent focus on supply chain labor availability on an ongoing basis.
As shown in our third bullet, we maintain a strong balance sheet, which enables us to invest in growth implement our strategic transformation and return cash to our shareholders.
Just last week, we announced an eight 3% increase in our quarterly dividend to <unk> 13 per share in the third quarter, we repurchased $6 $1 million or approximately 160000 of our own shares.
Becky will comment on this more in a few minutes, but we believe this disciplined and balanced approach to capital deployment best serves our shareholders by creating sustainable value.
Three years ago, we began a journey to strategically transform our organization by implementing new business strategies, and our new operating structure.
Key components of this is implementing a global technology platform to leverage automation and drive process efficiency.
We remain committed to this journey and believe that based on the progress made thus far we are well on our way to achieving the targeted benefits of this endeavor. There is still much work to do but I am confident that we are on the right path to realizing a greater future for <unk> in the days ahead.
In parallel we are executing our simplify focus and growth strategy to drive profitable growth and to fundamentally improve our business and earnings profile again, we are not yet where we aspire to be but I am pleased with the progress our team is making.
Before moving forward I would like to recognize the significant milestone we celebrated in August as shown on slide five.
50 years ago, the Dr Brock and inventor and entrepreneur founded ASIC industries from those humble beginnings as <unk> has grown into a global $1 billion manufacturer of equipment for road building and construction related products that connect the world.
In that spirit, we continued our mission of delivering innovative products that are truly revolutionizing the rocky road value chain.
50 years, it's a tremendous milestone achieved by few companies I was humbled to be joined by other Aztec executive team members as we rang the NASDAQ opening bell to celebrate our anniversary turning to slide six I would like to review current business dynamics and how <unk> is responding.
Industry demand for our equipment remains high as activities such as asphalt road building aggregate processing on concrete production as needed to support the ongoing investment in infrastructure across the markets we serve.
This has led to increasing levels of backlog and we are responding by expanding capacity and throughput in our operations.
We will leverage these investments and improved profitability as we grow. Additionally funds from the federal Highway Bill are beginning to be deployed.
Which should provide long term tailwind for future growth.
I have briefly addressed our own labor challenges, but also want to note labor shortages are impacting our suppliers as well.
Many of the components, we used in our equipment are produced and tight labor conditions are creating bottlenecks in the manufacturing processes for these components.
As noted we have action plans in place to address these challenges and expect to see progress in both labor and supply constraints over the coming quarters.
We expect our margins and revenue will improve as the supply chain normalizes.
Inflation has been another ongoing challenge for the last 18 months. However, we have made progress in offsetting inflation with favorable volume price and mix and we'll continue to pursue our disciplined pricing strategy to ensure we are fully capturing the value we're delivering to our customers.
Turning to slide seven we have achieved record backlog for the eighth consecutive quarter as a result of strong order activity to meet robust demand.
As we grow our workforce, replacing empower the right talent to ensure we are driving improvement with targeted higher engineering, such as manufacturing engineers for project management.
We strategically invested in equipment and technology to expand and automate our manufacturing operations and are leveraging the capabilities across all of our sites to facilitate demand.
The one asset business model as shown on slide eight aligns us around a unified framework centered around customers and markets are.
Our core values, clearly articulate our objectives to achieve operational excellence.
This approach positions us to capitalize on opportunities and address the industry headwinds.
Included in the model is our commitment to sustainability, we were proud to evidenced that commitment last week by announcing our support for the National Asphalt Pavement Association the road forward program.
This program is an industry wide initiative to engage educate and empower the U S asphalt community to pursuit of production of zero carbon emission asphalt payments by 2050.
Aligned with our one asset business model the three strategic pillars of our strategy simplify focus grow shown on slide nine support our primary goals of optimizing our manufacturing footprint and centralizing our business into common platforms and operating models to reduce complexity and cost.
Productivity and embed continuous improvement in our processes.
With that I will now turn the call over to <unk> to discuss our detailed financial results.
Thank you Barry and good morning, everyone as shown on slide 11 sales were $315.2 million up 18, 1%.
Strong growth in both equipment, and parts, which increased 20% and 11% respectively.
Our region there was a 23, 6% increase in domestic sales while international sales remained constant.
As Barry mentioned overall order rates were strong and we achieved our eighth consecutive quarter of record backlog, increasing 56, 2%.
Backlog increased in both segments with material solutions growing 32% and infrastructure solutions searching 75, 8%.
Order activity remains robust across geographies with international backlog up 39, 7% and domestic backlog of 59, 8%.
Continued to win orders as our commercial teams are connecting with customers to match their needs with our solutions.
Adjusted EBITDA increased one 2% to $16 $6 million, while adjusted EBITDA margin decreased 80 basis points to five 3%.
The decline was primarily from the impact of higher manufacturing costs due to inefficiencies in the supply chain and an increase in adjusted SG&A expenses, which were up two 8%.
We are investing in head count consulting fees travel costs and incremental costs from acquired business.
Adjusted SG&A expenses declined as a percentage of sales to 17, 8% from 19, 8% with same period last year.
In line with our strategy to lever investments for future growth.
Expect adjusted EBITDA margins to improve as overcome supply chain challenges and realize benefits from our transformation.
Adjusted earnings per share was 28, driven by inflationary pressures and material and labor.
This excludes costs driven by our transformation program, which will optimize our company for long term value creation.
Last year in the third quarter, we had a negative tax rate of 26, 1%. After recording a $2 1 million dollar benefit for evaluation allowance release in Brazil, and net R&D credits.
Our adjusted net effective tax rate for this quarter was 28, 4% primarily due to the relative weighting of jurisdictional income.
As previously communicated our full year range of 22% to 24% still holds.
Moving on to slide 12 infrastructures.
Infrastructure solutions sales increased 15, 7% to 201 $9 million in the quarter, primarily due to favorable net volume pricing and mix, especially in equipment and parts sales.
<unk> sales were up 16%, while international sales increased 14, 4%.
Byproduct equipment sales are up 20% and part sales grew 15, 1%.
Segment gross profit increased slightly to $41 1 million and gross margin decreased 210 basis points to 24%, primarily due to the impact of inflation and supply chain and logistics challenges.
Adjusted EBITDA margins were also lower following the 180 basis points due to higher SG&A expenses.
Turning to slide 13.
Our materials solutions sales increased 21% to $111 $8 million, driven by favorable volume pricing and mix.
Equipment sales grew with 31, 8% and parts were up four 3%.
Domestic sales were up 44%, while international sales declined 12, 7%.
Segment gross profit increased six 2% to $24 $1 million and gross margin decreased 300 basis points to 21, 6% due primarily to cost inflation and manufacturing inefficiencies this quarter.
Adjusted EBITDA margins for the segment were essentially flat.
On slide 14.
We highlight the key drivers of our year over year adjusted EBITDA Bridge.
<unk> EBITDA improved one 2% to $16 $6 million.
80 basis points as a percent of sales to five 3%.
<unk> contribution from volume pricing and mix more than offset the impact from inflation, however, negative manufacturing efficiencies due to supply chain disruptions and higher SG&A expenses offset most of that benefit.
Looking ahead, we continue to expect further benefit from price realization and the implementation of our transformation strategy.
Turning to slide 15.
Our cash conversion was lower as we are investing in growth, including an increase in working capital.
Our balance sheet remains solid and we expect our cash position to improve as we manage working capital and progressively resolve supply chain disruptions.
Our liquidity and negligible that enable us to withstand a variety of economic headwinds.
As a reminder, over time, our target range for net debt to EBITDA is between one five to two five times.
Slide 16.
This slide shows our disciplined capital deployment framework, we follow a targeted capital deployment approach within the context of our long term strategic objectives snacks my shareholder value.
<unk> identifying internal investments that meet our 14% return on invested capital hurdle and a strategic approach to acquisitions that align with growth objectives and financial criteria.
As Barry noted we are committed to providing a tangible return to shareholders. This quarter, we repurchased $6 $1 million in shares and last week, we announced an eight 3% increase in our quarterly dividend.
Before turning the call over to Barry.
I would like to briefly update you on our Oracle transformation projects summarized on slide 17.
The transformation supports the wanted to ask tech operating model by providing us with tools to operate more efficiently and effectively.
Beginning in May of 2023, we will be implementing ERP solutions across all of our global sites as.
As previously disclosed the process will take approximately 24 months and will conclude in 2025.
We have dedicated teams in precisely defined workflows to complete this phased implementation and I am confident in our team's ability to execute.
This project and suite of systems are key enablers of delivering long term financial targets shown on slide 18.
Companywide Oracle solutions platform will greatly improve efficiencies positioning us to achieve our long term goals I am excited about this initiative and look forward to bringing you further updates on our progress.
With that I will now turn it back over to Barry for his closing comments.
Thank you Becky turning to slide 18, I would like to conclude my comments with a review of our key investment highlights for.
For 50 years that tech has been connecting the world with heavy equipment to build essential infrastructure and have established leadership positions and are in industries that are aligned with positive long term secular growth trends over.
Over that time, our reputation for innovative.
High quality products and superior customer service have become recognized across our industry.
We have leveraged our global installed base to establish a recurring aftermarket parts business that greatly improves the stability and quality of our earnings profile.
This contributes to our strong balance sheet and generates cash to fund growth opportunities.
<unk> balanced capital deployment and enables us to weather economic challenges.
Finally, our strategic evolution built on the three pillars of simplify focus and grow is gaining traction and will enable the achievement of our long term vision and goals.
With that operator, we are now ready to open the call for any questions.
Yeah.
Thank you.
If you would like to ask a question press Star then the number one on your telephone keypad. If you would like to withdraw your question simply press Star one once again.
And we will pause for just a moment to compile the Q&A roster.
Okay.
And we will take our first question from Mig <unk> with Baird. Your line is open.
Yeah.
Thank you for taking the question good morning, everyone.
Good morning, Mike Good morning.
My first question is on.
On your comments on.
On a year ERP implementation.
I'm sort of curious if you can give us give us a sense in terms of what this will entail.
As far as I mean.
Incremental P&L investment.
How you intend to treat that.
Do you intend to adjust adjust that out or kind of better flow through.
And is there also maybe like a capex component that we need to be aware of.
Sure I'll take that one Meg.
Because we're going cloud there is very little that is capitalized on the various scheme of things. It's a very small portion that gets put on the balance sheet.
And so we continue to be adjusted out to the extent that a site has not yet gone live. So we'll retire their old system. They will get the cost of the new system and so our add back will come down dramatically over the next two years in 2023.
Mentioned will go live with the whole suite at different points, so there'll be elements of the HCM the CX as well as ERP that go live next year and then in 'twenty four 'twenty five it'll be all ERP rollout. So we will see that progress.
So we'll see the costs come down as we speak out.
2023 update the hobbyists.
Okay.
But youre not in a position right now to kind of give us a sense in terms of the.
Sort of costs that you guys are dealing with here because.
Even though we adjust that out I am presuming that this is going to be.
Cash.
It is all cash that's correct. We have we have stayed at that previous latest in that $115 million range for the total program.
And keeping in mind the program also includes.
The transformation of one of our facilities.
Which has the capital expense that you are talking strictly ERP, it's almost all expense. The second very program. That's in there is largely capital in very little expense.
Understood.
Okay then.
<unk>.
Maybe we can talk a little bit about your.
Reported inflation figures.
We've been in a relatively narrow range for the past three quarters and this kind of call. It 30, 30 plus million dollars range.
And I'm kind of curious as to how you were thinking about this figure on a go forward basis.
<unk> debt.
Some of the input costs like raw materials, maybe are starting to move a little bit lower so maybe you can comment on our fourth quarter, and maybe kind of what the setup into 2023 years.
Yes, Mig this is Barry I'll take that question to start with and Becky can add on if she has anything else to.
Two to contribute.
So we're pleased that as we've said all along we've had pricing thats been catching up to inflation earlier.
Earlier in the year, we had pricing that basically offset inflation in Q3, what we've experienced is pricing that actually outpaced inflation for really the first time as a company.
As we've also said prior when we look forward as we said earlier near through the rest of this year and into 2023.
We still have pricing in our backlog as of right now Mig that we haven't realized and we will continue to realize through Q4 and into 2023 from.
From an inflationary perspective, how we see that as we've started to see it actually slowdown in regards to the increase in some cases, it's actually stabilized.
And so on a year over year basis, we're projecting that we should start to see inflation change less.
As we go through further quarters and move forward, we know theres inflation actually in our in our inventory today that we haven't completely realized but we also know as I said earlier, we've got pricing that we haven't realized as well. So we think we've got pricing right now that will offset that plus we continue to look at our position relative to inflation and the mark.
<unk>.
Our teams continue to look at if we have to take more pricing actions moving forward through the rest of this year into 2023, we will continue to work with our customers and dealers to do that as well. So I think we're in a good place at this point in time Meg in regards to how we handle them moving forward, we've got better visibility.
We've got more control and more ability with our pricing and we feel like as I said.
Yeah.
Hello.
Please standby.
We appreciate your patience please stand by while we reconnect our speakers.
Yes.
And we do have our speakers reconnected. Thank you for your patience.
Yes.
Yes. Thank you. Good morning. So again. This is this is Barry Meg Im not sure where I got cut off here.
Answering your question, yes, well.
Last thing I heard you were kind of talking about.
Pricing and what you have in the backlog and kind of how that's flowing through into 'twenty, three and you mentioned that inflation is.
Certain portions.
Of your businesses kind of peaking.
Yes, so that's right. So we have seen some stabilization at least the increase in inflation has slowed versus what we've experienced over the course of the year.
We've got pricing in our backlog as you commented on that we haven't realized yet so as you move forward into 2000.
The rest of 2022 into 2023.
We'll continue to look at pricing to take actions there are properly in order to ensure that we're positioned appropriately in the marketplace to really deliver the value and get the value that we're providing to our customers and but I think generally make where we sit today is because now we've kind of turned that corner Ryan on pricing out.
Only outpacing inflation. So we're in a good place now where we can maintain that position and make the appropriate changes as we move forward into 2023.
Okay.
With that in mind, if we look for instance.
Ed I guess, you either segment really.
Meant gross margins.
What's the what's the proper framework for gross margins into 2023 is it reasonable for us to expect.
Sort of return to the kind of levels that we've seen maybe in 2020 when these price cost dynamics were.
Not nearly as onerous as well.
Experiencing here over the past call. It 12 months or so or is that premature in your view to set expectations that way.
Yes. Good good question. So as we look forward into 2000 through the rest of this year and into 2023, we believe that gross margin will be governed really by the supply chain. So if you look at our 2022 Q3 results you know the really was the manufacturing efficiencies really from the supply.
I change type issues that have had an impact on our gross margins.
As stated already our pricing inflation is as good a good mix today. So as we move forward into 'twenty, three and as we see supply chain issues improve and I would say generally Mig we've seen supply chain issues actually improved throughout the course of 2022.
And as if they continue to do so that will be able to claw back that the margin keep in mind. Our teams are extremely active in engaging with suppliers and alternative suppliers new designs doing things within our manufacturing facilities to try and offset any impact from.
The supply chain issues, but that would be our biggest determined at this point in time is is supply chain and as I said, we've seen it get better but theres certain things right now that we're still working through that has had an impact in Q3 and.
So as our action items become.
Get some more traction we should start to see some of that improvement into next year.
Understood final question for me.
In material solutions maybe.
Maybe you can give us a little bit of context surrounding.
Pretty strong order intake that you've had.
Here and I know that.
<unk>.
This segment does.
Quite a bit of its business through.
<unk>, so I'm kind of curious as to.
What's been driving the strength here relative to dealer stocking.
Or really if theres any other color either by equipment category or geography that you can sort of provide here. Thank you.
Yes, I think as we talked about before make this time of year is typically a ordering period and we do do some dealer.
Convention and some dealer engagement around this time of year as well and so for US we've kind of signaled I think that we would expect that we'd have potential growth in our in our order flow as we hit this time of year, just maybe a little bit more color Mig we've spent some time with.
What we call our executive customers. So these are customers that are owners of businesses or founders high level executives within our within our customers' businesses and through that process, we've surveyed them to understand how they see the market and where they see the market going in two data points.
That really came out of that is.
They look at 2023 infrastructure market versus 2022.
24% of those customers expect it to be just as good in 23 of what it was in 'twenty, two and 51% of the customer.
Sorry.
51% of the customers actually expect it to be 10% or more better than it was in 2022.
Other question. We've asked is from a capital budgeting perspective, and commitment perspective, how do they see 23 versus <unk> 22, and 56% of them see that they'll spend equally as much in 'twenty three as it did in 'twenty, two and 34% of them expect that they'll spend more in 'twenty three than it did in 'twenty. Two so I think thats just some good.
Data and color around the market dynamics that our customers are seeing and of course those are primarily north American customers. So hopefully that gives you some more color and supports why you hear us have confidence in and market demand.
Yeah.
And as a reminder, it is star one if you would like to ask a question.
And we will take our next question from Steve <unk> with Sidoti Your line is open.
Good morning, Gary morning, Becky.
Wanted to ask about what your and you covered this a little bit in terms of what youre seeing for component shortages sort of been a mixed bag for this earning season.
Just trying to get your sense is it getting easier to get necessary components from your suppliers and also I mean, there seems to be a bifurcation in terms of smaller companies still struggling more in terms of how they are prioritized by suppliers, who can get a little bit of take on that.
Yes, good morning, Steve. Thanks for the question. So the items that were there we have issues with today are I think have been pretty consistent electrical type components displays for equipment.
Hydraulic type components in our pumps and so on and so forth.
Cooling equipment type radiators and oil coolers and those types of things Steve. So that's kind of generally the types of issues that we're dealing with.
About this I think about there's really two parts of our business there is.
There's the part where the plant side of it where we're in a very vertically integrated and have that direct model, where I would say generally the supply chain issues have really slowed down significantly there was the other part of our business, where it's more procured type products and that's where we see some of the issues with hydraulics and electrical.
Trickle components and some of the cooling equipment packages, but I would say generally Steve we've seen some improvement in the supply chain and I credit our teams really for all of our hard work and actions they've taken to really drive.
Thats alternative suppliers new designs.
So on and so forth are just things, we do differently in our facilities to be able to manage through this more effectively so there's been there's been a reduction in the severity of the supply chain issues, but there are still some things right now as I alluded to that we continue to work through and honestly, they're not going to get fixed overnight, but generally we've seen some improvement.
Yeah.
Okay. That's helpful. Thanks, when we think about you talked a little bit about backlog and what your customers are expecting.
You mentioned in your prepared remarks, starting to see some of that federal highway spending slow when we think about the <unk>.
Significant growth in that infrastructure solutions backlog.
Is that part of that starting to see your customers starting to expect projects beginning next year.
Hey, Steve Steve Anderson.
We're hearing from our customers that they are starting to see some funds flow were seeing that other places as well so you.
As we said before we expected most of the flows of new projects to come online in 2023 and 2024 so less.
With what the expectations were and our customers are confirming that so we're pleased that as a good long term tailwind for the business. As you know went out through 2025 mid 2026, so glad to see those funds beginning to flow.
Yes, just maybe add some more color to that.
As we talk to our customers today Steve.
The majority of our customers have a backlog that really is our nine months and longer.
So they have a good backlog of work today and as those projects really start to flow through.
Confidence then giving us confidence that our order rates will continue to stay strong as really our implied order rate is showing in Q3.
What also is good about our customer set is they are not just sitting there relying on residential or nonresidential or they have the ability to really kind of flow their business towards areas, where theres opportunities and not only just from a revenue perspective, but also from a margin perspective, and and as you know Steve they've had really record years year over year over year.
From 'twenty to 'twenty, one and now into 'twenty, two so they've done well now when I talk to customers.
Yes, theyre experiencing some inflationary type impact, but they've also got great pricing capability that they'd be able to take advantage of it we will continue to take advantage of as we move forward in time.
Great.
Last one for me just in terms if I didn't hear if you updated your capex expectations for this year and if you're starting to plan.
Next year and how.
Whether or not you've incorporated any kind of factory automation efforts into into Capex.
Yes, I can take that one Steve we have lowered our expectation for the share we have $40 million to $50 million is the range, we dropped that to 35% to 45, and it's really timing on when we're receiving the the goods better on order.
When they'll go into actually usage so we've.
Pushed some things out into 2023, we expect 'twenty 'twenty three to be in that range of 30 to 40 as well some of it the carryover projects, but then the continued automation programs that we have going on.
Yes, just maybe a little more color to that all up our capex really that we put into the business over the last 18 months has really been a browned automation as we've talked about Steve we have a high dependency upon labor, we're very vertically integrated than most of our sites and so as we invest that capital it's really around automation.
The things that we're doing around capacity are really in a low cost to produce countries. So we're making sure that the capital that goes in will always have a good return regardless of the cycle that we're actually under the business. So I'm pretty pretty pleased with the momentum we built around identifying projects that will really return long term shareholder value through.
Cycles for Aztec moving forward.
Great. Thanks, Brian Thanks Becky.
Thanks, Steve.
And we will take our next question from Larry de Maria with William Blair. Your line is open.
Hey, good morning, Larry Hey, guys a few things.
First of all.
I followed the last question correctly that was about the infrastructure Bill not the highway Bill and so just to confirm youre starting the customers are starting to see some projects come.
What is your kind of timeframe on.
The expectation for meaningful numbers to come out to the market.
That is for you guys, but maybe for projects.
Cash hitting the market.
Yeah, Hey, Larry This is Barry so just to kind of reiterate what Steve had mentioned, yes. We are our customers are starting to see some of the funds grew from that law. That's been passed I would also tell you that.
In certain states Larry.
As you probably know there were certain funds that were allocated for Covid relief.
Application.
Because that's actually slowed down now states have the ability to actually.
Go to the government federal government and put forth projects, which now are also being funded by somewhat COVID-19 relief.
The money as well so.
The.
JA types funding, but it's also other types of funding that theyre able to get there. So we've started to see that flow through it. We've always said, it's really typically run 18 months from the time the law or the policies at before you start to see good traction.
You said some of that funding is flowing through today.
Got it that's very helpful. Thank you.
And then secondly.
Chris a little bit about pricing specifically.
Maybe you can delineate and break down that price volume mix that you saw in the quarter, but.
Kind of more importantly think about carryover pricing into next year from the progressive price hikes through this year when they hit so.
Okay. Thank you tackle that the pricing questions and I think on the carryover to next year.
Yes so.
As we looked at.
The pricing volume and mix versus inflation that I already said in the call we've.
We've seen pricing actually outpaced inflation and so we've identified inflation to be $20 million on a year over year impact for the company pricing is greater than that we've had a nice back from volumes. So we're getting more products out the door and leveraging that.
As well and actually.
But honestly, Larry we've seen a little bit of a negative from the mix, so pricing being up volume being a good contributor.
And mix being a little bit of a drag on us for the year over year quarter comparison.
We believe and we know that there is pricing in our backlog that we haven't realized Jeb, we've said that pretty much all year long that we're.
We're getting caught up and this is the first time in 2022, where we would like to turn the corner on being able to have pricing more than offset inflation.
Do we expect that we'll have pricing that will flow through.
Each quarter as we move through the rest of the year and into 2023.
And we'll continue to look at.
As our needs to increase pricing.
Well as we go through that same timeframe.
Okay. Okay I guess thank you.
Looking at <unk>.
<unk>.
The level of topline sales, so not too far differently.
Sure.
And I know, there's I guess, there's probably some will obviously supply chain constrained so with gradually improving supply chain can we more or less take the $3, 15% to 20 number as your capacity for the next three or four quarters add a little bit of price and add a little bit of gradual capacity increases to get to the top line or in other words take out some of the typical seasonality.
<unk> and kind of look at the run rates right now and some slightly better as we go forward.
Yes, without getting into a level of detail or providing guidance. We haven't started to do yet we do make.
Our prepared remarks that.
Why chain improves we will experience revenue and margin and margin growth and I guess I'll just leave it at that.
Okay. Thank you good luck.
Thanks.
Okay.
Okay.
And ladies and gentlemen, there are no further questions at this time I would like to turn the call back to Steve Anderson for any additional or closing remarks.
<unk>, we do apologize for the technical difficulty earlier, but appreciate you staying on the call. So I appreciate your participation on our conference and thank you for your interest in our company as today's news release indicates the conference call has been recorded and a replay will be available through November 16 and archived.
Cost will be available for 90 days the transcript will be available under the Investor Relations section of the <unk> industries website within the next seven days all of that information is contained in the news release distributed earlier this morning.
This will conclude our call, but I'm happy to connect with any of you that have additional questions. Thank you all have a good day.
Okay.
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may now disconnect your lines and have a wonderful day.
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