Q2 2023 Methode Electronics Inc Earnings Call
[music], Hello, ladies and gentlemen, and welcome to the meta what electronics second quarter.
Year 2023 results call.
At this time all participants are placed on a listen only mode and the floor will be opened for questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host Mr. Robert Cherry.
Vice President of Investor Relations, Sir the floor is yours.
Thank you operator, good morning, and welcome to metals Electronics fiscal 2023 second quarter earnings Conference call.
Before this call we have prepared a presentation entitled fiscal 2023 second quarter financial results, which can be viewed on the webcast of this call or found at Metro Dot com on the investors page.
This conference call contains certain forward looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof.
These forward looking statements are subject to the safe Harbor protection provided under the securities laws.
Methode undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in met those expectations on a quarterly basis or otherwise.
The forward looking statements in this call involve a number of risks and uncertainties the.
Factors that could cause actual results to differ materially from our expectations are detailed in methods filings with the securities and Exchange Commission, such as our 10-K and 10-Q reports.
At this time I'd like to turn the call over to Mr. Don Duda, President and Chief Executive Officer.
Thank you Rob and good morning, everyone. Thank you for joining us for our fiscal 2023 second quarter earnings Conference call I'm joined today by Ron <unk>, Our Chief Financial Officer.
Both Ron and I will have opening comments and then we will take your questions.
Let's begin with the highlights on slide four.
Our sales for the quarter were a record $316 million.
This was achieved despite a significant headwind from foreign exchange.
Which was partially offset by strong sales in China.
Lost sales due to the Covid lockdowns in China in the first quarter were recovered in the second quarter.
These China sales recoveries are now behind us.
Also helping to offset the foreign exchange headwind.
Ongoing material spot buy and premium freight cost recovery efforts.
Driving our overall sales performance was a record quarter for sales in our industrial segment of over $100 million.
The surge in sales was driven by power distribution solutions.
Most of our datacenter and EV applications and by commercial lighting.
Some of the increase was related to the China Lockdown sales shift.
That aside it is clear that we are successfully executing our strategy to grow our industrial sales.
And better balanced business mix between the automotive and industrial segments.
In the quarter and we continue to face ongoing cost increases due to the general inflation in material and labor as well as supply chain challenges, which resulted in the remedial actions such as spot buys and expedited shipping.
We continue to work relentlessly with our customers to share in the absorption of these increased costs.
We are gaining traction in these efforts, but our ability to pass along price increases will lag as a matter of process as long as high inflation continues.
On the order front, we had another solid quarter with over $65 million in annual program Awards. These programs are driven by power and lighting applications two of our key growth opportunities.
Turning to EV activity sales in the quarter reached 20% of our consolidated total.
As a percentage of matches our guidance for the full year.
Of the total awards in the quarter over 80% or an EV applications with most of them being power distribution solutions.
In the quarter, we continued to reduce debt, which is at its lowest level since a great kind of acquisition in 2018.
Does after the end of the second quarter, we amended our credit facility, which increased our debt capacity.
This gives us additional resources and flexibility to fund inorganic growth.
During the quarter, we purchased approximately $20 million in stock.
As of the end of the second quarter, we now have approximately $97 million remaining in our buyback authorization.
This buyback program remains a key part of our capital allocation strategy.
Moving to slide five minutes, we had another solid quarter of business Awards.
The awards identified here represent some of the key wins in the quarter and represent $66 million in annual sales at full production.
As a reminder, the full launch timing of most of these programs could be anywhere in the range of one to three years from now.
Also while the majority of the dollar value of these awards are for new programs. Some of these words are for extension through volume increases on existing programs.
At the top of the list our EV programs, representing most of the dollar value. The awards are mainly for power products associated with the skateboard architecture.
Such as bus bars for the battery Inverters and motor as well as products, such as connectors and distribution units.
The awards are also from both traditional automakers as well as E beam focused manufacturer.
<unk> continues to be a solid growth engine for metal.
In other areas, we're awarded programs for lighting and power solutions for applications in auto data Center defense and energy.
Overall, it wasn't a successful quarter for awards that will continue to drive organic sales growth.
Furthermore, the pipeline of future awards remains robust.
That said the ongoing inflationary cost environment geopolitical risks and now an increased foreign currency headwinds as caused us to moderate our near term outlook.
To conclude metal delivered strong sales in the quarter driven by our efforts in power and lighting solutions.
Furthermore method is expecting another record year for sales and continued growth in <unk> applications.
Lastly, we are reaffirming our three year organic sales compounded annual growth rate target of 6%.
This target demonstrates that our business model is not just healthy but.
But as prospering from the strategic steps that we've taken to grow the business.
At this point I'll turn the call over to Ron who will provide more detail on our second quarter financial results and outlook for the full year.
Thank you Dan and good morning, everyone.
Second quarter net sales were a record $315 9 million compared to $295 5 million in fiscal 'twenty, two an increase of $20 4 million or six 9% led by record sales in the industrial segment.
This quarter sales were driven by strength in power distribution solutions for both data center and EV applications and by lighting solutions for commercial vehicles.
The quarter also benefited from approximately $15 million of sales recovered from Q1 through the Covid Lockdowns in China.
As Don mentioned, the Q1, China sales recoveries are behind us.
Also helping sales was $5 8 million of spot buy in premium freight cost recovery.
Partially offsetting these positive factors was an unfavorable currency impact on sales of $22 2 million.
Excluding the spot buy and premium freight cost recovery and foreign currency impact sales.
Sales increased by $41 2 million or 14, 2%.
EV product applications amounted to 20% of sales in the quarter, we still anticipate electric and hybrid vehicles sales to represent 20% of our full year fiscal 'twenty three consolidated sales.
Lastly on sales the percentage of sales in the automotive and industrial segments in the quarter was 62% and 33% respectively. The industrial segment is clearly becoming more prominent to the overall company.
Second quarter income from operations decreased one 2% to $32 8 million from $33 2 million in fiscal year, 'twenty, two mainly due to higher selling and administrative expenses as well as unfavorable foreign currency translation.
The higher selling and administrative expenses were mainly related to lower annual performance based compensation in the prior year.
The leverage from the higher sales in the quarter was more than offset from the impact of higher expenses and currency translation.
Second quarter diluted earnings per share increased four 2% to <unk> 75 per diluted share from 72 per diluted share in the same period last fiscal year.
The higher sales more than offset the negative impacts from foreign currency translation and higher effective tax rate.
In addition, lower net interest expense contributed to the increased income before income taxes.
The effective tax rate in the second quarter was 17, 4% as compared to 16, 7% in fiscal year 'twenty two.
The increase in the effective tax rate was mainly due to mix of jurisdictional earnings.
Please turn to slide eight.
Second quarter gross margins were 23, 5% an increase of 10 basis points as compared to 23, 4% in fiscal year 'twenty two.
The higher sales in the quarter were the main contributing factor.
Mostly offsetting the increased sales was higher materials and other inflationary costs.
Also weighing on gross margin was $5 8 million in pass through recovery sales at zero margin.
Second quarter, selling and administrative expenses as a percentage of sales was 11, 6% compared to 10, 6% in fiscal year 'twenty, a 100 basis point increase.
As I previously mentioned the increase was mainly a factor of lower annual performance based compensation in the prior year.
Also higher professional fees contributed to the increase.
Our historical selling and administrative expense as a percentage of sales is typically in the range of 11% to 12% as it was this quarter.
Second quarter operating income margin was 10, 4% as compared to 11, 2% in fiscal 'twenty to an 80 basis point decrease the higher selling and administrative expenses more than offset the leverage from the higher sales in the quarter.
Over time, we expect our consistent cost recovery efforts, including price increases will lead to improved margin performance.
Please turn to slide nine.
Shifting to EBITDA, a non-GAAP financial measure second quarter, EBITDA was $46 1 million versus $47 4 million in the same period last year.
Two 7% decrease.
EBITDA was negatively impacted by higher costs due to material inflation and unfavorable foreign currency translation.
The impact from these factors was partially offset by higher sales.
Second quarter EBITDA margin was 14, 6% versus 16% in the same period last fiscal year, a 140 basis point decrease while our margin was down in the quarter. We clearly have the potential to leverage our higher sales trajectory over the longer term as we continue to mitigate the challenging.
Cost environment.
Please turn to slide 10.
Year to date, we have reduced gross debt by $6 5 million and since our acquisition of great kind of in September 2018, we have reduced gross debt by over $150 million.
We ended the second quarter with $129 6 million in cash during the quarter, we bought back shares for $19 7 million, bringing our fiscal year to date total to $31 6 million.
Program to date, we have bought back $103 million of shares leaving $97 million remaining for purchases under the board authorization as of the end of the second quarter.
Net debt and non-GAAP financial measure increased by $35 9 million to $74 4 million from $38 5 million at the end of fiscal 'twenty, two mainly due to the share repurchases of $31 6 million and some unfavorable working capital changes.
Our debt to trailing 12 month EBITDA ratio was approximately one three and our net debt trailing 12 month EBITDA ratio was approximately 0.5.
We recently amended our credit facility, which increased the revolving credit commitment to $750 million from $400 million and in addition, there was a $250 million accordion feature which can be activated with the lender's consent.
We believe the increased capacity will offer the company more flexibility from a capital allocation perspective, especially for inorganic growth initiatives. The details of the credit facility can be found in our recent 8-K filing.
Please turn to slide 11.
Second quarter cash from operating activities was $15 4 million as compared to $27 million in fiscal year 'twenty two.
The decrease of $11 6 million was primarily due to increased accounts receivable as a result of the record sales in the second quarter.
Second quarter capital expenditures was $8 4 million as compared to $5 4 million in fiscal 'twenty, two an increase of $3 million the.
The increase was mainly a function of a lower level of spending in the prior year quarter as the spending up level of this quarter was also a bit lower than anticipated.
This is due to timing and not due to a concerted effort to reduce capex.
Second quarter cash flow are non-GAAP financial measure was $7 million as compared to $21 6 million in fiscal 'twenty, two a decrease of $14 6 million.
The decrease was primarily the result of higher accounts receivable and higher capex during the quarter.
We expect cash flow to improve in the remainder of fiscal year 'twenty three as we target reduced inventory levels and other positive working capital initiatives combined with increased net income all while supporting increased capex.
We have a strong balance sheet and we will continue to utilize it by investing in our businesses to grow organically and by pursuing opportunities for inorganic growth.
Please turn to slide 12.
Regarding fiscal 'twenty three guidance. It is based on management's best estimates and are subject to change due to a variety of factors, including the ongoing semiconductor shortages other supply chain disruptions inflation economic instability in Europe , both short and long term supply chain rationalization.
<unk> successful cost recover reactions restructuring efforts and the ongoing impact from the COVID-19 pandemic, especially in China.
While we have experienced some success and recouping cost recoveries. We expect these headwinds will be with us at least through the remainder of fiscal year 'twenty three.
The expected revenue range for fiscal year 'twenty, three has been narrowed to $1.170 billion to $1 billion $200 million. The lower end of the previous range was raised $10 million and the upper end was reduced by $10 million, leaving the midpoint unchanged.
Keeping with our historical cadence, we expect a sequential dip in <unk> sales due to seasonality followed by a sequential increase in Q4 sales.
The expected diluted earnings per share range has been updated to $2 70.
To $2 90.
With the lower end unchanged and the upper end reduced by 20.
Thus, reducing the midpoint by 10 cents.
A key reason for the reduced earnings per share midpoint is an increase in negative foreign currency translation and as such our new EPS guidance range reflects the current foreign currency rates as of the end of the second quarter also increasing uncertainty for the second half of the year or the execution of cost recovery actions as.
Well as potentially product mix or.
Our other guidance assumption had been updated as follows.
Our estimated annual effective tax rate is now 17% percent to 18% narrowed from 16% to 18%. It does not include any potential discrete tax items.
We anticipate capex of between 40% and $45 million net.
<unk> narrowed from the range given in the first quarter as we gain better visibility on the remainder of the year spending.
Estimated depreciation and amortization expense has been lowered to $50 million to $55 million from $54 million to $58 million due to lower estimated capex for the remainder of the year.
As a reminder, based on the strong bookings we have realized over the past two fiscal years much of which is for the EV market. We previously announced a three year organic sales compounded annual growth rate target of 6% with fiscal year 'twenty two as the base year.
The CAGR considers the anticipated roll offs of all relevant programs and reinforces that our organic growth strategy is putting the company on a solid sales trajectory.
Don that concludes my comments.
Ron Thank you very much and we are ready to take questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
We asked about posing your question. Please pickup your handset investing on speaker phone to provide optimum same quality.
Please hold while we poll for questions.
Thank you. Our first question is coming from Luke Young with Baird. Please go ahead.
Thank you good morning, Thanks for taking my questions.
John Sorry, hoping you could give us your updated thoughts on the macro especially specific to auto.
Most interested in your updated views on China right now in light of the recent Covid developments, there as well as any current thinking on energy risks in Europe and based on the prepared remarks to my hearing that China may have impacted your thinking on the updated guidance specifically.
Let me, let me answer that one first.
It wasn't it was a good.
A good quarter in China, some of that was catch up with rent as Ron talked about.
We are in but what's the biggest risk for us when we are concerned about shutdowns in China.
We have seen some of our.
Customers slowdown.
Their releases, particularly in the data center.
So we've taken that into account in our guidance, but we do see a little slowing and we are apprehensive about.
Yes.
Shutdowns.
Those that we saw that in the fourth quarter of last year in the first half of the first quarter and those were dramatic for us and I'm pleased we did.
Probably recover all of that but.
That's probably our number one concern as far as Europe .
We're taking a little bit of a wait and see approach.
I'm not as concerned.
Where we've seen softening in our E bike business.
But we view that as temporary but that came into play into our.
Our thinking in the guidance.
As Ron pointed out we did not we lowered the.
The high end because we just didn't think of all the factors I just talked about we didn't think that was likely to.
And particularly what also with the.
FX.
That was not taken into account.
They gave guidance.
Brian .
Yes.
Those those two items are our biggest areas of.
Concern.
Obviously, the dollar against the Euro and that has strengthened in the last has weakened in the last.
A couple of weeks, so, we'll see where FX ends up there the remainder of our fiscal year look to your energy question, but as far as Netflix facilities are concerned were operating in model we're operating.
In Egypt is a smaller facility in Belgium, but the two major facilities should not be impacted.
But our customers could be impacted which would have a direct effect on ourselves I think we're okay on perhaps maybe there might be an issue in Belgium, but.
And it would be the effect on our customers that would cause us to have to have issues.
Okay, great. Thanks for all that and then second.
Question for Ron just regarding working capital inventory of course has been ramping the last cluster sub it it kind of flattened out this quarter. Instead, there is the big step up in <unk>.
Tied to the higher sales can you just expand on how youre thinking about working capital into year end and into next year both.
As it relates to cash flow, which you already commented on some extent, but I'm wondering maybe more importantly, strategically relative to the current environment as well.
Yes. So we clearly look we we had a very strong quarter in the <unk>.
Our especially was negatively impacted we expect that to turnaround I mean, if you look at the midpoint of our guidance from the revenue perspective, it's going to be a little less than where we were for this fiscal year. The first half of the fiscal year. So we expect improvement in that we were pleased to see the inventory at least turn it could put on that and we expect some.
Improvement over the next six months on that perspective.
Although it will likely be.
A gradual improvements so.
With more pronounced improvements as we get through some of our make where we sell strategy.
And localized things are near shore things, a little bit more we would expect inventory improvement.
Certainly in the next fiscal year as well so we clearly haven't been up to the methods historical standards in terms of how we generate cash, but we are on a trajectory to two.
To get that to be where we more have historically been and I think.
I would comment there is nothing in <unk>.
Any.
Any concerns there in inventory.
Inventory.
A large part is up because the products that we're keeping an inventory have gone up dramatically I think melvin incentives liquidity almost 50 years six pictures of some of the inventory increase is due to the standard cost and things of that nature. So.
Until the pit material prices go down so what we're really focused on what we can't control is the logistics on how we order. So that's that's where the team is focusing on right now.
Okay and then.
Lastly, just a bigger picture question.
If you could comment on the evolution. It thus far is that in terms of architecture and applications in the awards. This quarter, you said, it but as far as not only for battery applications, but also for E motor and inverter I think there may be you had been one inverter award in the past if I look back at.
Your historical bookings just wondering is there an expanding use cases for bus bar is just outside of just the battery that youre seeing right now.
In general those are the three areas of the vehicle that you would see bus bars than we'd thought.
Historically about.
The battery bus fire.
We've started to ship those quite some time ago, while we have moved into the.
Inverters.
And the motors and if you go to our <unk>.
Investor deck, I think there's one slide in there that shows a.
Pictures of all three so that's.
The majority of our bookings have been in battery bus bars, but we are moving in to those other two areas and that would be.
Natural gas.
And why have several bus fire.
Suppliers.
The major one is the battery supplier.
She'll be able to do the others. So.
That's the change it doesn't represent.
Huge bookings at the moment, but.
Anticipate that doesn't have that as one of the reasons, we say robust pipeline.
Okay great.
Got it thanks for all the color.
Thanks Luke.
Thank you. Our next question is coming from John <unk> with Sidoti <unk> Company. Please go ahead.
Good morning, guys and thanks for taking the questions and congratulations on a good quarter.
Thank you I wanted to circle back to the.
The Asia question, I guess is how phrase it sequentially.
Sequentially revenues went from 30 million last quarter to roughly $45 million this quarter.
How much of that.
You characterize it as a cash appraised and would you expect that business to dip again.
They just kind of level what are your thoughts there.
There was certainly a catch up.
Other thing we had there John was.
Our power business into data centers, which is a nice business for us.
A lumpy business and in the first two quarters, we experienced.
Really great sales from that and we in our guidance, we've contemplated a bit of.
Lowering our tempering of and not maintaining that level in the second half of the fiscal year.
I think.
And really in both of those areas we achieved.
Our full year.
The numbers, so we are anticipating a slower.
Third and fourth quarter, there and you take that into account and then you've taken the catch up.
I would say, it's going to be down.
Okay, Alright fair enough and if I look at the industrial segment.
You called out that the data center as we just mentioned EV commercial vehicles as far as the year over year growth.
Can you kind of.
Quantify.
We had the greatest impact year over year.
Sure.
If we look at the segment the <unk>.
<unk> piece of it the data center and the Avp's had had the biggest growth and then the second factor would have been our commercial vehicle lighting, and then behind that would've been our <unk> radio remote control in that in that order.
Okay fair enough and.
It sounds like you are.
Your the M&A pipeline.
They have improved or changed from three months ago can you talk a little bit about what youre seeing out there as far as potential inorganic growth.
Sure.
I would say the pipeline stays robust.
We.
Briefed the board once a quarter and what opportunities there those have not.
They've maintained their pace nothing that.
Is eminent.
But I'm not unhappy with the amount of looks at.
We see.
The credit facility that was expiring so we needed to.
Re up that and then Ron took the opportunity to avail ourselves of more borrowing capacity, if we needed it.
Uh huh.
Those.
I don't know that they've come down appreciably yet.
They will perhaps private equity is a little bit on the sidelines.
Which gives us may be an advantage, but we'll have to see how things are.
Pan out if we get to.
To the point of discussions of pricing with the particular target.
Yes.
I would I would agree with those assessments and.
Getting the expanded credit facility.
Sure.
It was a good thing for us and certainly gives us more flexible flexibility and latitude to.
That part of the capital allocation strategy.
And I think that gives us an advantage when we're talking to the targets down the page we're ready to go if we can get.
And the right due diligence.
And the right price, so I think thats a definite advantage.
Fair enough.
I guess one last question.
Far more aggressive.
Buying back shock stock then.
Prepaying debt.
What are your thoughts on that on a go forward basis.
Or maybe phrase it differently do you have a lower share count embedded into your guidance for this year can you closed at.
At the end of the second quarter.
John I think it's.
It's more about.
Timing within our strategy over the next couple of years in terms of how we foresee allocating capital and.
Absent an acquisition.
We have been allocating more capital towards share repurchases.
In terms of reduction.
Prior to the facility that we just.
<unk> on October 31, there was a term loan a component to that and if we were to repay that we would basically lose the ability to re borrow against that now under the new facility that doesn't have that components. So we will have more flexibility without it being punitive to.
Our ability to rebound so mainly we just we just continue to generate cash and allocate capital towards share repurchases and we can pivot and deviate if we were to do an acquisition.
Got it.
Thanks for the info I appreciate it guys. Thanks for taking my questions.
Thank you.
Thank you. Our next question is coming from David Kelley with Jefferies. Please go ahead.
Hey, good morning.
Thanks for taking my question.
I wanted to follow up on the earlier powered distribution and bus bar EV discussion I was hoping you could talk about the bidding opportunity there versus what youre seeing with win rates with customers.
Are you seeing a step up in both in <unk>.
Implying some market share gains there.
Yes.
We've been shipping.
Bus bars since 2006 and metal has been in the bus bar business.
Probably 60 as maybe is out.
So we're well versed in how to make those that gives us a competitive advantage. We also are now we are a solid tier one supplier.
I wasn't with a great quality record so we get it all.
We've got the wins, but we get a lot of looks across the board on bus bars, and as I said earlier moving into power distribution and in the end of the motor.
Bus bars, so are we gaining market share yes.
We have our threshold of pain, however, and we're pretty disciplined on.
On that.
We track our wins.
When.
<unk> talked in the past about.
How we look at our booking opportunities we have embryonic we have.
On a percentage still at 50% and then we have 75% and we track over over the years, what our win rate is and then I think the last one we looked at and this is across the board from evidence not just us television on the <unk>.
75% or we're in the 60 some.
Percent rate, if we lose we lose because we've reached a price point that we do.
Don't want to go.
So I think thats.
Definite market share gain for us and we've talked about that.
I think we've done the team has done a great job.
Capitalizing being I guess quote unquote early mover within the space because we have such a rich rich history, we have the capacity in the manufacturing systems and everything.
On three continents to support.
All of the EV.
Local manner, so we're really.
We were in a good spot and as Don mentioned.
Oh six with Tesla.
We've been mixing it up for quite a long time so.
<unk> been getting some good looks with our existing relationships with the Oems the automotive Oems.
We've done a good job of closing business.
Okay got it that's really helpful. Maybe one more follow up on the.
The supply chain discussion that's been ongoing here curious if youre seeing any signs of it.
Improved visibility or incremental product availability and I guess, taking a step further do you foresee any opportunity for some relief from some of the spot buys into the back half of the year are you assuming any relief there as we think about updated full year guidance.
I take some comfort, although it's only one quarter and that our spot buys were lower this quarter.
I would feel better.
At the end of this quarter, if they were less in the same in the fourth so that's the only one one data point we still.
We are challenged every day.
On supply issues is it last yes is it coming to an end I am not willing to say that yes, I think we are.
At least through the end of our fiscal year and Theres been a lot of people.
People that have been.
Predicting an improvement <unk> been wrong.
That's almost a non answer but.
We don't know we can we can track it but it's been.
It is still difficult and we've seen our.
Our customers continue to have issues.
Okay got it so just to clarify it sounds like you're assuming some cadence of spot buys continuing into the back half of the year end guidance.
Definitely that's that's.
That's fair Okay, yes, Okay got it thanks, guys. That's really helpful. I appreciate you taking my questions.
Thank you.
Once again, ladies and gentlemen, if there are any remaining questions or comments. Please press star one on your phone at this time.
Our next question is coming from Gary <unk> with Barrington Research. Please go ahead.
Hi, good morning, everyone.
Most of the questions have been answered.
I just wanted to get an idea of what what was your share count at the end of the quarter I got like 37 million five out of the queue is that correct is that what you're using for EPS calculations.
At the end of this quarter looks like 37, yes that would be it yet.
Okay.
Okay. So then the other question a couple of other questions I would have is.
Most of the FX.
<unk> are coming from the Euro is that correct.
From the euro with the.
The RMB secondary yes.
Okay.
In RMB.
But.
When you're producing in places like Malta.
Belgium.
Our plant as well.
Yes.
So there's some offsets there.
Expenses, you're incurring in those local currencies as you translate back in the U S is that correct.
There are absolutely and a lot of it is just.
Fortunately for US we do a good job of making earning a profit in our non U S locations.
Just from the translation to the financials from a U S. GAAP perspective, they're worth less than they would have been with the dollar strengthening but we absolutely do a lot of internal offsetting at each of our locations and then have a FX program that looks at everything from a consolidated basis as well.
<unk>.
We start getting into receivables and payables and things of that nature Cross border, we take actions here as well so pretty robust.
<unk> management protocol.
Okay, and then lastly in terms of your end clients and users.
Talked about.
Trying to pass on price increases there is that become.
Any easier for lack of a better word are more acceptable other suppliers I've talked to have said that.
Developed a modicum of success of passing on some of these cost increases.
Oh boy.
I think if we had our salespeople in the room that I would say absolutely not.
Difficult.
With any customer and then.
Customer to.
Our suppliers and we're pretty tough so it has to be a justification it takes a while.
<unk>.
Youre always walking a fine line between Jan need to book more business, but I get pretty tough on price increases so.
<unk>.
Is it easier than it was before the pandemic I guess you could say it is because that is the.
Customers are somewhat used to that but it's not.
I don't know if it is getting any easier.
We're giving some success but.
Yeah.
In fact, I think we've had a lot of success, but eliminate inflation with temperature performance.
The benefit of it but.
I don't know.
You start going to the world more than once going a second time it gets that part of it makes sense.
More delicate that's for sure.
Okay. Thank you.
Hum.
Thank you.
At this time there appear to be no further questions in queue. So I'll hand back to Mr. <unk> for any closing comments he wishes to me.
Well, thank you very much and all thank everyone for listening today and wish everyone, a very safe and pleasant holiday season, Good day.
Thank you, ladies and gentlemen, and this does conclude today's conference call. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation.
Okay.