Q3 2022 L B Foster Co Earnings Call
Okay.
Good day, and thank you for standing by and welcome to L. B Foster's third quarter of 2022 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you will need to pay.
Star one one on your telephone.
We'll then hear a message that your hand is raised.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to the Investor Relations manager Stephanie Let's whack. Please go ahead.
Thank you operator, good morning, everyone and welcome to L. B Foster's third quarter of 2022 earnings call.
AME is Stephanie with block the Companys Investor Relations manager, our President and CEO , John Castle, and our Chief Financial Officer Bill Coleman.
Our third quarter operating results market outlook and business developments this morning.
We will start the call with John providing his perspective on the company's two recent acquisitions and one divestiture and Alt.
The third quarter performance, including market development.
Bill will then review the company's third quarter financial results.
John will provide perspective on company outlook and his closing comments. We will then open the session up for questions.
Today's slide presentation, along with our earnings release and financial disclosures were posted on our website. This morning and can be accessed on our Investor Relations page at L. B Foster Dot com.
Comments. This morning will follow the slides and the earnings presentation.
Some statements, we're making are forward looking and represent our current view of our markets and business today, including comments related to COVID-19.
Forward looking statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by Securities law.
For more detailed risks uncertainties and assumptions relating to our forward looking statements. Please see the disclosures in our earnings release and presentation.
We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables provided within todays earnings release and within our accompanying earnings presentation carefully as you consider these metrics.
For the purpose of helping you understand the underlying performance of the company will be referring to adjusted EBITDA net debt and adjusted net leverage ratio during the presentation today.
The company also had a limited number of unusual adjustments during the quarter for which we for which certain metrics have been adjusted in todays presentation for purposes of more accurately communicating the company's operating performance.
These non-GAAP metrics are reflected in our reconciliation tables included in the appendix to the earnings presentation.
Additionally in September of 2021, we announced the asset sale of our piling products Division. It on August one 2022, we completed the sale of our track components business.
Due to the nature of these sales we have presented these businesses within continuing operations in our financial statements.
With that let me turn the call over to John .
Thanks, Jeff and Hello, everyone and thanks for joining us today for our third quarter earnings call before I turn it over to Bill for a financial review I'd like to begin by covering the more significant takeaways from the quarter and recent activity starting with our strategic portfolio transformation accomplishments as previously reported we continued our portfolio transformation with <unk>.
The acquisitions of the vein Hospital company business August 12, and the acquisition of intelligent video on July six. Additionally, we completed the sale of track components business on August the <unk>.
These transactions were well aligned with our strategic roadmap and I'll cover these moves a bit more detail on our bank.
In our legacy business, we faced significant inflationary headwinds across most of the business has adversely impacted our margins for the first half of the year.
Particularly in the precast business.
And the Q3 results were beginning to see benefits over mitigation efforts with adjusted margins up year over year in all segments.
We are particularly pleased with what we see what we have seen an improved margins in our legacy precast business, which which were up 410 basis points over last year.
I should also highlight that recorded a $4 million adjustment to sales in the quarter.
For the settlement of certain long term contracts related to the Crossrail project things like Kingdom.
Just on reduce both sales and gross margin in the quarter ultimately just came down to a business decision.
But I'd like to add our performance on the Crossrail project has to deliver significant value since 2015, and the settlement should allow us benefit from increasing project opportunities. We are seeing in the U K, starting with Hs too.
A 10 year project connecting the series of London, Birmingham by high speed Transit system.
Our adjusted EBITDA increased 111% from $4 4 million to $9 3 million on a 3% adjusted sales growth year over year. This was reflective of the portfolio moves we completed along with the improved performance in our legacy business.
At quarter end, our backlog stood at approximately $273 million of five year high and up 17, 7% year over year.
Order intake levels for the quarter were slightly down from the prior year due to the timing of some project orders in the rail segment.
Finally, the order levels in the quarter do not include any significant business from infrastructure investment jobs Act passed in Congress just over one year ago today.
I don't know Bill and I will cover our outlook for orders and demand at the end of our prepared remarks.
As a reminder, slide six reflects our strategic playbook, where streets with five of the initiatives highlighted representing our recent accomplishments. We have made significant progress on our strategic transformation that was outlined in December 'twenty, one over the past year, we have completed five transactions comprising of three acquisitions.
And two divestitures positioning us for profitable growth in the future.
We previously committed our goal of transforming certain elements of our portfolio from slower growth commodity like offerings to higher growth technology focused solutions.
The transactions on slide seven represent our progress towards this transformation.
On June 21, we completed the acquisition of scratch for a purchase price of $7 $4 million with annual revenues just under $8 million scratches the UK industry leader in digital system integration.
Having mainly retail markets with expertise in advanced digital display technologies and capabilities.
We also completed the acquisition of intelligent video or IV.
This purchase was completed at a total purchase price of approximately $1 million.
Ivy is a UK developer of high quality surveillance security and safety solutions that align with our growth initiatives focus on remote condition monitoring and visual communications.
Both scratch and IV highlight our strategic core growth initiatives to transform L. B Foster to technology focused high growth infrastructure solutions company, thus, enabling us access to a wider target March 19, and Western Europe .
On the divestiture side, we completed the sale of our traffic wardens business in Canada for $7 8 million.
The sale provides funding for our investment in our growth platforms.
Finally on August 12, we completed the acquisition of <unk>, which is aligned with our strategic playbook initiative to double down on pre cast concrete.
<unk> had over $28 million of sales in 'twenty, one and meaningful profitability, which made the acquisition price of approximately $52 million very attractive.
We are already seeing the value potential of Andrew's Good company company coming together with our legacy precast business and encouraged by the outlook of the combined business.
In summary, these transactions and our legacy results demonstrate that we are transforming L. B foster with an eye towards achieving our aspirational goals and increasing shareholder value.
Bill will cover the financials for Q3 and I'll come back at the end with some closing remarks on our overall market and business outlook.
Do you Bill.
Thanks, John and good morning, everyone I'll begin my comments by covering the third quarter highlights on slide number nine.
Note that the schedules in the appendix provide more detailed information on our financial results, including the non-GAAP measures Stephanie referenced.
As a reminder, we divested the piling business and since September of last year and track components in August of this year.
These transactions are not being treated as discontinued operations.
Accordingly, the amounts presented today include the piling business within the steel products and measurement segment.
And attract components business within the rail technologies and services segment, unless otherwise noted as adjusted for comparability purposes.
Third quarter sales were $130 million essentially flat with last year.
As previously mentioned net sales for the quarter included a $4 million adverse impact associated with the Crossrail settlement.
This impact reduced both net sales and gross profit in the quarter.
Gross profit increased by $800000 or 70 basis points from the prior year quarter.
The Crossrail settlement reduced gross profit margin by 240 basis points in the current quarter.
In addition, a purchase accounting adjustment related to van Van Fusco acquired inventory adversely impacted reported gross margins by 70 basis points.
Excluding these items third quarter gross margin was 28% up 370 basis points over last year's third quarter.
SG&A expense was up $2 $6 million due in part to $1 $4 million and costs associated with the company's acquisition and divestiture activities and contingent consideration for the van <unk> acquisition.
Adjusted EBITDA in Q3 increased $4 9 million to $9 3 million, a 111% increase year over year.
I'll cover the drivers of this improved result on the next slide.
Operating cash flow was a usage of $5 $5 million in Q3, due primarily to higher working capital levels needed to deliver the robust organic sales and quarter end backlog, which increased nine 1% from the second quarter.
We expect to expect to generate strong operating cash flow in Q4, as working capital requirements ease through the balance of the year.
Third quarter orders totaled $137 3 million down one 1% from the prior year.
Orders improved 5% organically and five 6% from acquisitions, but were offset by an 11, 7% decline due to divestitures.
Third quarter backlog increased $41 $1 million year over year due to a 12, 7% organic increase and six 7% increase from acquisitions, partially offset by a one 6% decline as a result of divestitures.
Slide 10 provides an overview of the drivers of our year over year performance in the third quarter.
The bridge on the left shows the overall change in sales, which reflects the strong organic growth of $15 3 million or 11, 8% during the quarter.
The impact driven by portfolio activity added $7 $2 million from acquisitions.
Was more than offset by an $18 $6 million reduction in sales related to businesses that were divested.
The adjusted EBITDA chart reflects the impact of the legacy business growth and margin expansion and net portfolio activity impact on adjusted EBITDA results.
Adjusted EBITDA for the current year third quarter removes the impact of the Crossrail settlement.
Acquisition and divested divestiture related costs the.
The purchase accounting adjustments and contingent consideration expense related to van <unk> and the loss on the track components divestiture.
Note that adjusted EBITDA for the prior year third quarter removes the $2 $7 million gain on the divestiture of the piling business.
Adjusted EBITDA increased $4 9 million to $9 $3 million year over year.
The drivers of the improved performance include organic growth and margin expansion in our legacy business and the accretive effect of our portfolio moves.
I'd emphasize that adjusted EBITDA from our portfolio reshaping efforts improved $1 $5 million on 11 $4 million less sales highlighting the strong leverage delivered by this initiative.
Adjusted EBITDA as a percentage of adjusted sales expanded from three 4% last year to six 9% in the current quarter.
Margin expansion in our legacy business was driven primarily by our precast business, but all segments contributed to the improved results.
We previously communicated our goal to transform our portfolio from slower growth commodity like offerings to higher growth more profitable technology focused solutions.
We are seeing early indications we are on the right path in our reported results and look forward to continuing our value creation journey.
Over the next three slides I'll cover the performance of each of our segments, starting with our rail segment on slide 10.
Third quarter rail segment revenue increased $3 $4 million year over year, driven by 11, 8% organic growth, partially offset by a one 9% reduction associated with acquisition and divestiture activity and a five 3% reduction.
<unk> associated with the cross rail settlement.
Gross margins were also impacted $4 million due to crossrail and excluding this settlement rail gross profit margins expanded 250 basis points.
New orders declined from the prior year due to the sale of the track components business and timing of orders primarily related to rail distribution.
Over the trailing 12 months sales and orders have been approximately $300 million.
Resulting in no change in the backlog.
As reflected on slide 12, pre cast concrete products segment revenue increased $10 9 million or 66% year over year.
Organic sales increased 25, 2% and the van <unk> acquisition contributed 35, 4% year over year.
Gross margins increased 450 basis points year over year, driven by the legacy business and the impact of the van <unk> acquisition.
Margin expansion in our legacy business, which was up 410 basis points year over year.
Reflects the expected fulfillment of backlog generated ahead of pricing actions as well as increased volume year over year.
The expansion in the overall segment margins includes $900000 in inventory adjustments related to the van <unk> acquired inventory.
Which negatively impacted segment margins by 290 basis points.
Orders and backlog levels remain robust in our pre cast segment and we expect this favorable trend to continue with the van <unk> acquisition.
And the announced government funding.
Funding programs.
The steel products and measurement segment revenues decreased $14 3 million or 37, 6% year over year.
The organic sales increase was five 2% offset by a $16 $3 million decline or 42, 8% from the sale of the piling business.
Gross profit margins improved 230 basis points due to the sale of the dive looted piling business as well as increased pricing and favorable business mix.
Sequentially Q3 margins were up 70 basis points, reflecting our efforts to mitigate commodity inflationary headwinds coupled with favorable business sales mix.
Order rates in Q3 increased 58, 8%, while backlog increased 47, 7% with both increases due primarily to a large order for coated pipe and our Birmingham, Alabama facility in support of a carbon capture and sequestration project.
The prior year orders included $13 $2 million associated with the piling business that was divested.
Our year over year results are reflected on slide 14.
Year to date sales decreased $43 million or 10, 1%.
The impact of divestitures contributed $61 $6 million of the decline or 15, 4%.
We offset by a three 5% organic sales increase and one 8% due to acquisitions.
Steel products and measurement segment net sales declined $51 million or <unk> 42, 1% due to that.
Due to the piling divestiture.
The rail segment declined $6 $1 million or two 7% driven by the track components divestiture accounting for $2 $4 million of the decline as well as the crossrail So at settlement.
These decreases were partially offset by increased sales in our global friction management business.
The free cash segment realized a $16 8 million increase or 33% driven by $6 $4 million from the van <unk> acquisition and strong sales in the southern U S regions.
Yes.
Sure.
Gross profit in the current year to date period was $62 8 million, a $4 $4 million decrease or six 6%.
The decrease in gross profit was driven primarily by the impact of the piling divestiture and the Crossrail settlement, partially offset by sales strength in precast.
Free cash gross profit increased by $2 $3 million, including gross profit of $1 $3 million from the <unk> acquisition.
Which included the $900000 inventory purchase accounting expense.
Rail gross profit declined $1 $8 million due to the Crossrail settlement.
Steel products and measurement gross profit declined by $4 $9 million driven primarily by the sale of the piling business.
Selling and administrative expenses for the year to date period increased $1 5 million or two 5%, including $2 million associated with the company's current year transformation activities.
Adjusted EBITDA year to date, which is adjusted for the impact of the Crossrail settlement.
Acquisition and divestiture related items and non routine insurance proceeds was $16 7 million, a seven 8% increase compared to the prior year period.
Our liquidity metrics are reflected on slide 15.
As expected our net debt increased during the third quarter to $94 million with the closing of the 52 million dollar Vanhoose go acquisition.
On August 12, 2022, we amended our credit facility to obtain approval for the van <unk> acquisition and temporarily modified certain financial covenants to accommodate the transaction.
The amendment modified the maximum gross leverage ratio covenant through June 30 of 2023.
The maximum ratio through December of 2022 is four times.
As of September 30, our gross leverage ratio was three three times.
With expected cash generation from operating activities we.
We expect our gross leverage ratio will improve in the fourth quarter and moving into 2023.
Also in the third quarter, we generated approximately $7 $8 million in cash from the track components divestiture and we finally received a $5 6 million federal income tax refund.
Both items were accretive to our leverage ratio at the end of the quarter and we are now pursuing an additional $2 $8 million federal tax refund.
As we've indicated in the past, we will strive to maintain a balanced level of indebtedness relative to our overall profitability cash generation and capital structure with a long term target of around two times net leverage.
My closing comments will refer to the slides 16, and 17 covering orders revenue and backlog by segment.
The book to Bill ratios on Slide 16 reflects the increasing strength, we've seen in our business through the third quarter.
Rail technologies and services orders were softer in Q3, but this is just timing of orders over the trailing 12 month period sales and orders are approximately $300 million.
We continue to see strong order intake in our precast concrete business with with Q3 orders totaling totaling $31 million up approximately 31% versus last year, driven by the <unk> acquisition, which added $7 $1 million in orders since we took owners.
<unk>.
Steel products and measurement orders increased significantly due and due to the coatings order previously mentioned.
And lastly, our consolidated backlog on slide 17 reflects robust growth across the portfolio, particularly in the precast concrete and steel products and measurement segments.
Our quarter end backlog is at a five year high and is up 17, 7% versus this time last year.
Backlog was impacted by a 12, 7% organic increase and a six 7% increase associated with acquisitions, partially offset by a one 6% decline due to divestitures.
Robust order intake and backlog levels demonstrate the ongoing strength in the business and commercial markets we serve.
While recessionary market conditions remain a broader macro risk.
We remain optimistic in the long term prospects for the growth in our served markets.
Thank you for your time and I'll now hand, it back over to John for his closing remarks.
Thanks, Bill Please turn to slide 19, where I'll provide some closing remarks on the overall market and business outlook.
The portfolio moves we cover during today's call demonstrate our commitment to executing the strategy and divesting in our growth platforms. We are currently focused on assuring a seamless integration for the acquired businesses, while evaluating growth opportunities that our combined business is present.
More to say on those opportunities in the coming quarters.
As Bill indicated our backlog is at a five year high and this does not include any significant business related to the infrastructure investment and jobs Act.
We do however have line of sight to significant infrastructure projects across our portfolio that are well aligned to our growth strategy and quotation activity is increasing.
We believe these programs will provide some degree of demand support should market conditions deteriorate.
As Bill mentioned, there are still products and measurement business has seen an uptick in order activity in third quarter.
This has resulted in a 63% increase in backlog during that period of time.
And while overall operating conditions are expected to remain challenging for the foreseeable future. We are confident in <unk> ability to navigate these headwinds and demonstrate as we demonstrated in our third quarter results.
In summary, we remain cautiously optimistic that a recessionary headwinds may be tempered by the government infrastructure spending programs and also over the last couple of years.
As a result, we expect the prospects were stable to improving demand for our products and services in the future to remain promising.
In the meantime, we have been laser focused on executing our strategy, which was rolled out during investor day in December of 'twenty one.
As demonstrated in our actions and our results were transform L. B Foster technology focused high growth infrastructure solutions provider.
Guided by our strategy, we remain committed to delivering our aspirational goals of approximately $600 million in revenue and $50 million EBITDA by 2025.
While this quarter results are encouraging these are the early days in our journey to restore and improve shareholder returns.
As we actually integrate our recent acquisitions, we plan to further leverage our growth platforms and real technologist precast concrete.
And at the same time continue to optimize optimize our performance and our returns portfolio.
In closing I'm very proud of what our team has accomplished in such a short period of time their energy and commitment makes all the difference I look forward to continuing the journey with them and reporting our progress in quarters to come.
I'll now turn it back to the operator for the Q&A session.
Thank you.
Reminder, to ask a question simply press Star one one on your telephone to get in the queue.
One moment, while we compile the Q&A roster.
Alright, one moment.
And as a reminder to ask a question that is star one lines. Our first question comes from Alex Rygiel with B Riley. Please go ahead.
Thank you gentlemen couple of quick questions here backlog looks fantastic can you talk a little bit about the implied.
Profit margin in backlog today.
Obviously that is suggesting sort of.
Margins could look like sort of as we proceed into 2023.
Sure, yes, thanks, <unk> for joining us today really appreciate it and backlog is strong.
With a five year record as far as activity really feel very good about it and of course, improving profitability is coming.
With that backlog build you wanted to give a little more some more color to that yeah, yeah. Good morning, Alex.
Yes, I guess the thing we would highlight is that early in the year, we were emphasizing that the precast backlog had a.
A bit of depressed margins in it relative to business that was booked ahead of our price increases that we were able to realize within that segment and we started to see that abate as we got into Q3 and you can see that we had a really strong performance in margins in our <unk>.
Free cash business.
Both year over year and sequentially.
I would add that on top of that van <unk>, which we had for about half the quarter. In 2022 also had very strong margins and were accretive to even the precast margins, including the $851000 adjustment that we had in.
The purchase accounting adjustment related to the acquired inventory.
So and I guess as we looked at our mitigation actions that we've taken over the year. It took it took time for it to ultimately manifests itself in our in our margins and.
This quarter was the first.
Order that we really saw that come through obviously adjusting for the Crossrail settlement that was a bit of.
Depression to the margins in the quarter, but we view that more as a non routine item that should be behind us at this point. So overall I would say that.
Our expectation on margins is that Q3 was solid and that we should continue to see improvement from there.
Yes.
Reiterate what you said there yes.
We had to work through that GSA contracts on the free cash side is a good part of our backlog Alex with related to <unk>.
And we just didn't have the ability to pull a lever on that because those revenues were constrained so.
So we were able to work through that first half of the year.
A good part of that backlog so.
We're in pretty good shape here heading into Q4 and beyond.
And then as we think about the recent press releases.
Regarding the carbon pipeline.
Supposed to think about how to quantify that from a revenue basis and what the timeline of revenue recognition could look like on that sure.
Sure.
You heard me started there a little bit because of the big uptick we had in backlog we've been waiting for this and excited about it and we'd like to thank our friends, John Doe and company is SIFCO and our team back in Birmingham that worked hard to make this happen.
With the leadership of Brian for even in our group Fantastic progress.
So this is going to be a very very long project 2000 miles of pipe and total is one of the largest orders we have ever booked our contribution will be about 500 miles of 24 inch pipe for coty outside diameter of it.
We plan to start that production in the at the beginning of the second quarter of 2023.
The actual size of it it will be around $20 million in sales.
So we haven't seen something like this in some period of time.
Fantastic congratulations.
Thank you thanks, Alex.
Thank you one moment for our next question. Please.
It comes from the line of John Bair with ascend wealth advisors. Please go ahead.
Good morning, John .
Hi, John how are you all doing good.
Good quarter well yourself.
Too bad.
Got a couple of questions here in the past you had mentioned.
That <unk> had some bottlenecks with delivery of free cash products.
The <unk>.
End user didn't you have to keep them on your own site basically have you seen any easing of that as situations.
So Jon Thanks, again for joining us today and your questions. It is getting better.
It's a disruption we're having with COVID-19 the getting the permits as well as the sites ready.
Hasbro has improved and the weather is also helping us.
In the third quarter as well so the situation is much better and we've seen just in the last 120 days.
Okay. That's good.
Another question turning to the recent.
Summit carbon solutions.
Award.
That's a fairly controversial project.
From what I.
Have read they have about 50% of the right of ways secured or signed up by landowners, but theres quite a bit of.
Controversy around that.
So.
The question is at what point.
We'll American cast iron begin to manufacture pipe do they have to wait until this.
Is completely.
Locked up or is it your understanding that portions of that pipeline will in fact, yet bill where they have the right of ways.
And.
Thank you.
All of our non honestly because of the of what the scope of the project is in <unk>.
37 different facilities that they're tying together and then moving that over 2000 miles of distributed pipe.
I hear you but.
Having said that there have been major progress as privately funded cisco's ramping up right now getting a second mill online and we're doing the same so we're very bullish and optimistic thats going to go forth as outlined.
It seems like a lot of these.
Green energy related projects.
Projects.
Want to them, but they don't want them in their own backyard. So.
It seems that.
Gums are works up a little bit there.
Last question.
I have in that is.
How rapidly do you believe you can pay down that debt load.
Sounds like you have pretty good cash flow coming in from van Hoose goes.
Acquisition and so forth.
What's your timeline on that or what's your what's your outlook on how quickly you might be able to.
That debt.
That level down yes.
Again, thanks, so im going to turn it over to bill, but we know that we're going to do this so this was planned.
But we are pleased with the cash generation that we're getting from our new companies coming in we don't want to be running too high we've seen we've been there before we learned our lessons.
Also we got a little run up of inventories going on now to <unk>.
<unk> make sure that we're getting product to our customers.
Bill do you want to give a little more color on yes, yes, I can add to that so when you think about the third quarter. We had the acquisition proceeds and we actually had a very strong quarter in terms of revenue organic revenue growth.
Sequentially as well so it also ended up adding to our working capital.
And we have a little bit of inventory also to support the build in and working capital for revenue going into Q4.
So we expect Q4 ultimately to be a pretty strong cash flow quarter, and then as we move into 2023.
So we're going to be pretty judicious about paying down debt over that.
As the year progresses.
I'd also highlight that one of the things that John mentioned earlier is that we have line of sight to some pretty attractive growth programs related to the <unk> acquisition.
So as we move into 'twenty, three we will be thinking about some of the capital needs that are required to support those programs, but we'll also be prudent in terms of the level of debt that might be necessary to support those programs and make sure. We're systematically in terms of paying down the debt all relative to the profitability.
Stability and cash generation network.
We're paying I guess.
We're incurring I'll remind everybody that our longer term target is around two times and we are certainly elevated at the moment because of the acquisition and our goal will be to get back to that two times leverage ratio over a period of time alright.
Alright.
Do you have any other.
Divesture possibilities.
It might.
To help you.
Generate cash that might be used that way or what's your thoughts in that area.
If you go back and look at the.
The playbook that I laid out today, and we laid out back in Investor day, that's an ongoing process that we have in our returns portfolio looking at those businesses to generate cash as well as the business viability in the future. So that's an ongoing process.
Alright, Thank you very much for taking my questions.
Rest of the year. Thank you.
Thank you one moment for our next question. Please.
And it comes from the line of Chris Sakai with singular research. Please proceed.
Hi, Chris.
Yes, hi, good morning.
Good morning, Chris.
What are you seeing in the south it starts increased building sales are concerned and pre cash.
And it has the strength continued into the fourth quarter.
Yeah. Good question. So we watch that very closely obviously with the acquisition of <unk> now that we're in that type of business and Tennessee as it really bullish market for us in the Carolinas North Carolina's is strong. These are big markets for US and then close Texas is one of the largest up and coming.
Residential spots that we see.
And we'll be looking at maybe in penetrating the Florida market over time, notwithstanding the recent event there with hurricanes so.
That is part of the world is going very very strong.
That's one of the reasons, we're very bullish about vascular school operation.
Reminding the group today, we only have the one facility up and running.
Commissioning in the second facility.
So we're looking for some big things to happen and bringing these are our <unk> legacy business together with that and really putting the <unk> brand and product out there in the marketplace, specifically in that type of marketplace and the south looks very good to us.
Okay, Alright, and then pre cash what drove the gross margin expansion in the base business.
So we talked a little bit about that earlier with Alex.
What we saw much of our.
We run around $70 billion, historically and in backlog in that business. A good part of that is in our buildings and restrooms and a large part of that goes to the state or federal.
So they are locked in the different contracts related to government contracts that GSA agreements.
So much of those are.
The type of projects have a long gestation period, Chris where they go six months to a year. So we booked a number of those jobs in 'twenty and 2021, and we were held with very little ability to increase our our price so.
So we just had to work them through the backlog.
And we did that in the fourth quarter and first quarter and second quarter of this year.
So we feel very good where we're sitting today, we're able to go get price, where we need it and work off that backlog that was we call constrained. So the future looks very good in that business for us.
Okay sounds good and last one for me.
What are you seeing for new orders and the yield products and measurement business.
Is this is this a growing trend or not.
So.
That group comes in and we got many things that contribute to that group right now right and the Big one was obviously, what's going on in the coding side. The other business that we are in the coatings has had a very strong year. The Willis ball winch acquisition has been a really strong year.
And we've been very very pleased with their performance over the year.
On the steel side.
We divested we divested the piling group right in September of last year, So that leaves us with the fab side and Thats, a little choppy, but we're looking for the infrastructure money really kick in and the balance of this year into next year and we're starting to see that in that business with the bridge form work.
That's been very very good for us and bidding activity is extremely high and we hope to grid activity will follow as well in 'twenty, three and 'twenty four and beyond so I think the infrastructure will have a big plan and still and I mentioned in the call today.
We're seeing quite a bit of bidding activity in quoting activity related to the.
Infrastructure jobs act from just over a year ago.
But we're not rolling that through our facilities, yet, but we do anticipate that to happen.
Coming up in the first quarter second quarter of next year.
Okay. Thanks for your answers.
Thanks, Chris.
Thank you and once again, ladies and gentlemen, if you have a question simply press star one one to get into queue.
I will turn the call back to John Castle for final remarks.
Thank you very much really appreciate everybody joining us today, thanks for hanging in there with a little bit longer pitch today, but with all this important really to demonstrate and come out and really share with you. How we feel the company and what's going on and really get into the adjusted side of the company.
And the fact is I think we've come a long way very pleased with the team's work here with the five acquisitions as <unk> done over the last 12 months and I think the transformation, we're doing related to playbook.
And specifically on the growth side is really coming together nicely driving towards our aspirational goals that we laid out during 2025. So thanks again, everybody go out and vote have a good day. Thank.
Thank you.
And with that we conclude today's conference call. Thank you for your participation and you may now disconnect. Good day.
Okay.
The conference will begin shortly to raise Johan during Q&A you can dial one one.
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