Q4 2022 Astec Industries Inc Earnings Call
Speaker 1: Hello and welcome to the Aztec Industries fourth quarter earnings call.
Speaker 1: As a reminder, this conference is being recorded. It is my pleasure to introduce your host, Stephen Anderson, Senior Vice President of Administration and Investor Relations. Mr. Anderson, you may begin. Thank you, and welcome to the Aztec fourth quarter 2022 earnings conference call. Joining me on today's call are Jaco Fundermerve, Chief Executive Officer, and Becky Weinberg, Chief Financial Officer.
Speaker 1: In just a moment, I'll turn the call over to Jaco 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,
Speaker 1: The company refers to various US GAAP, which are generally accepted accounting principles, and non-GAAP financial measures, which management believes provide useful information to investors. These non-GAAP financial measures have no standardized meaning prescribed by US GAAP and therefore are 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. Management of the company uses both GAAP and non-GAAP financial measures to establish internal budgets and targets and to evaluate the company's financial performance against such budgets and targets.
Speaker 1: You should also note a reconciliation of GAP to non-GAAP results is included in our news release and in the appendix of our slide deck. All related earnings materials are posted on our website at www.asdacindustries.com including our presentation which is under the investor relations and presentation tabs. And now I will turn the call over to Jaco. Thank you Steve. Good morning everyone and thank you for joining us this morning. I would like to begin my comments by saying how humbled and grateful I am to be speaking to you as the CEO of Aztec. When I joined the company 6 years ago I was drawn by what I saw. A strong company with a history of delivering valued products to the world.
Speaker 2: had had tremendous potential. Now a CEO , I am even more convinced of these early impressions. Aztec has established itself as a market leader in the industries we serve, bringing innovative solutions to the road construction industry for over 50 years. The team here is talented, dedicated and dedicated to producingPlugin equal!"
Speaker 2: and committed to making the company as strong and resilient as possible. As a leadership team, we remain united around our purpose of Build to Connect. It defines where we are going and what we can become. We have made progress and I'm proud to be part of the team that has moved us forward. The priorities for ASTEC in 2023 are shown on slide 4.
Speaker 2: I will share more detail in a few minutes, but the priorities are executing on our simplified, continuous and growth strategy.
Speaker 2: and delivering on our commitments to employees, customers and shareholders. As CEO , I will continue to champion these priorities for the organization, while emphasizing the importance of execution to drive consistent and sustainable financial performance. We have a sound framework and motivated team, and we are working together to create a culture of outperformance to reach our potential. Through our Build to Connect purpose, we are enabling our employees.
Speaker 2: to create a customer-centric culture that provides value, and this will benefit our shareholders. That being said, we still have work to do. Our efforts this year will be primarily spent on our Simplify and Focus pillars. This foundation will better position us to grow profitably through organic investments in the future.
Speaker 2: Then at the right time, targeted acquisitions can be pursued and effectively integrated into our operations. This is a great company with an outstanding team and differentiated products.
Speaker 2: and I'm very grateful for the confidence the board is placed in me to be its next CEO . I look forward to meeting you with you over the coming months and I come up to perform in a way to earn your confidence in the future. On slide 5 you can see in the end markets
Speaker 2: We serve through our two complementary segments, ensuring that needed materials are delivered and installed for ongoing infrastructure investments. I recently attended the National Asphalt Pavement Association's annual meeting and was able to connect with many of our customers.
Speaker 2: our two complementary segments, ensuring that needed materials are delivered and installed for ongoing infrastructure investments. I recently attended the National Asphalt Pavement Association's annual meeting and was able to connect with many of our customers. I can tell you that they are optimistic.
Speaker 2: and the interactions were positive as the project pipeline looks very full for 2023 as well into 2024. I will also add that a lot of the work that is planned for this year is not yet being driven by the infrastructure bill, as we are still in the early days of those funds flowing into specific projects. Excitement is high and our customers are anxious to get the solutions we provide.
Speaker 2: The three pillars of our strategy, simplify, focus and grow, are based summarised on slide 6. They align the elements of our performance culture and provide the organisation with a common framework to create value and drive returns. Beginning with simplify, we are optimising organisational structure by reducing complexity across our organisation. Starting with the leadership team and extending into select areas.
Speaker 2: We are focused on consistent execution and driving efficiencies. The current system and process consolidations help enable efficiencies through better reporting and access to data as well as uncover opportunities for further improvement in our operations. We are also using Simplify to help optimize our product portfolio, including which products we make, how we make them and where we make them.
Speaker 2: Once we simplify and remove unnecessary complexity, we are better able to focus using the one ASCIC business model to drive excellence in everything we do. Operational excellence is permeating our entire organization, driving a focus on quality and performance into our culture.
Speaker 2: Performance includes thorough planning and execution. We are further assessing prior strategic actions and are harvesting learnings that will benefit us going forward. Prior strategic actions under review currently include our Drive to 25 initiative.
Speaker 2: the performance of our Brazil business, our site closures in MEC 1 and Tacoma, and the integrations of recent acquisitions. We improve as an organization when we drive functional excellence across every part of the company.
Speaker 2: As we do this, we discover that operational excellence is not only for production teams, but is applicable to all areas such as commercial teams where we can elevate the customer experience through off-the-market excellence. This drives higher customer satisfaction and engagement as well as growth in our business.
Speaker 2: Profitable growth will be driven by expanding our parts and service business, our dealer networks and our international presidents. It will also be driven by bringing innovative new products through markets and by leveraging technology and digital connectivity for our customers. We have great products and a team that is diligently working to develop improvements and enhancements
Speaker 2: to meet customer needs and deliver solutions to add value. Together, these three pillars of Simplify, Focus and Grow help ensure we have the right priorities to consistently drive profitable and sustainable growth, as we bring value to our customers, employees, partners and shareholders. Moving on to the financial results and the current business environment.
Speaker 2: We summarize our Q4 key messages on slide 7. I have already mentioned some of these and focused on those comments not yet addressed. Our fourth quarter results reflect a strong finish to a year that was characterized by challenging and dynamic environments. The Google Aztec team rose to the challenge by demonstrating our core values.
Speaker 2: delivering unique solutions and by providing outstanding customer service to our valued commercial partners. Q4 sales improved 31% compared to last year and full year sales were up 16%. In addition to the strong effort of our team, we benefited from robust end market demand across both segments. Positive customer sentiment.
Speaker 2: is proving sustainable even in the face of ongoing macroeconomic uncertainty. And our record level backlog gives us confidence as we enter 2023.
Speaker 2: As a market leader in our industry, we develop and deliver technology that enable our customers to be successful. We are taking this same approach internally as we unify existing systems, standardize processes and integrate solutions with the rollout of our Oracle suite of solutions. Becky will say more about this in a few minutes.
Speaker 2: As a market leader in our industry, we develop and deliver technology that enable our customers to be successful. We are taking this same approach internally as we unify existing systems, standardize processes and integrate solutions with the rollout of our Oracle suite of solutions. Becky will say more about this in a few minutes. Turning to slide 8.
Speaker 2: I would like to review current business dynamics and how we are responding. As we entered 2023, the demand outlook is much the same as it was during the second half of 2022. Infrastructure projects which tend to be longer term and less correlated with near-term economic fluctuations have remained robust and our customer sentiment has remained positive. This supports our confidence and challenges us to increase output to capacity expansion and operating efficiencies, to meet strong demand and convert backlog into delivered product.
Speaker 2: As funding begins to flow from the Federal Infrastructure Investment and Jobs Act, we expect this to provide future revenue growth and visibility. As a reminder, the bill currently runs until September 2026. The health and reliability of the supply chain we rely on has shown improvement over the last year, eliminating some of the challenges we encountered. However, pockets of tight labor conditions are persisting.
Speaker 2: As funding begins to flow from the Federal Infrastructure Enbacement and Jobs Act, we expect this to provide future revenue growth and visibility. As a reminder, the bull currently runs until September 2026. The health and reliability of the supply chain we rely on has shown improvement over the last year, eliminating some of the challenges we encountered. However, pockets of tight labor conditions of the system contribute to supply chain delays.
Speaker 2: Our procurement and engineering teams have done a good job to identify and qualify second sources when feasible. From a human capital management perspective, we continue to hire and train personnel to increase operations staff and output. At the same time, we are implementing operational excellence initiatives to mitigate future disruptions in our supply chain. Inflationary pressures are stabilizing, but we expect some inflation to persist in 2023. We continue to grow actively offset inflation through pricing as needed.
Speaker 2: We show our historical backlog on slide 9. As you can see, backlog at the end of Q4 is down slightly from the record level we established in the previous quarter. Over the past two years our backlog has increased 153%, and some moderation is expected. We are making steady progress on our initiatives to convert backlog and expect to see this trend continue as order rates normalize and we increase output. I mentioned earlier how the one-astic business model
Speaker 2: shown on slide 10, has aligned us along a unifying framework and centered us around our customers and markets. It is this alignment on core values that unite us as an organization and keeps us focused on achieving our operational excellence objectives. It guides us in onboarding talent and as we add new employees to meet customer demand. It directs us as we leverage our global footprint to reduce lead times, optimize revenue, and manage costs. And it empowers us to better mitigate supply and logistic challenges.
Speaker 2: by building a robust supply chain. This model is a critical component of our success, and I believe it has become an ingrained component of our culture that will enable continued future success. Slide 11 and 12 lay out targeted areas of growth with our primary focus being the organic growth opportunity so non-slide 11.
Speaker 2: These initiatives, such as growth in parts and service and dealer expansion, are beginning to gain traction. Economic opportunities offer us the most straightforward and efficient path to profitable growth.
Speaker 2: And we will continue to prioritize these initiatives while we keep our eyes open for selective opportunities to acquire businesses that meet our discipline, strategic and financial filters.
Speaker 2: We are on an ESG journey, as shown on slide 13. That is focused on key areas where we believe we can create the most value. We are still early in our journey.
Speaker 2: But already we are making progress. Slide 14 shows a carbon footprint model where we can employ our materials knowledge, process tools and telematics to monitor and drive lower emissions. This is an area where I believe we can add even more value and one that is generating interest from our customers.
Speaker 2: Staying on the theme of telematics, Slide 15 shows how we are developing comprehensive digital solutions, including positive contributions from our Graphwall and Mines acquisitions. This approach aligns well with our Simplify, Focus and Grow framework as we develop capabilities that improve our operations, elevates the customer experience for our partners.
Speaker 2: slide 16, we highlight the aspect digital suite, beginning with materials on the ground.
Speaker 2: to complete the roads and bridges and then ongoing service. We provide products and services that differentiate the inside aspect as the industry leader.
Speaker 2: And while I am proud of the progress we have made, I am even more excited about the path we have in front of us to deliver sustainable, profitable growth. With that, I will now turn the call over to Becky to discuss our detailed financial results.
Speaker 2: And while I am proud of the progress we have made, I'm even more excited about the past we have in front of us to deliver sustainable, profitable growth. With that, I will now turn the call over to Becky to discuss our detailed financial results. Thank you, Yaco, and good morning, everyone.
Speaker 3: I'll begin my review of 4th quarter results on slide 18. Sales were $349.9 million, up 31.2%, with strong growth in both equipment and parts, which increased 45.3% and 11.8%, respectively. By region, there was a 32.2% increase in domestic sales and a 27.4% increase in international sales. Strong demand also kept backlog near the record level we established in Q3, coming down slightly as we increased output and order rates are beginning to normalize.
Speaker 3: Compared to the last year, backlock is up 19.7% on a consolidated basis. By segment, infrastructure solutions, backlock grew 26.2% while material solutions increased to 0.9%.
Speaker 3: Domestic backlog saw the greatest increase, improving 23.3%. However, international was also up, growing 2.8%. This broad-based increase in backlog across segments and regions is indicative of the robust demand we are seeing in our end markets and the success of our global commercial chains winning business.
Speaker 3: Adjusted EBITDA increased $22.2 million, expanding adjusted EBITDA margin 370 basis points to 6.3%.
Speaker 3: This was primarily due to the net positive impact of volume, pricing and mix that outpaced inflation and higher manufacturing costs due to lingering inefficiencies in the supply chain.
Speaker 3: We have previously outlined our pricing actions and that we expected pricing to catch up with the rising costs we encountered over the last two years. This quarter we realized significant pricing which helped improve profitability and drive margins. We did see an increase in adjusted SGANE.
Speaker 3: which was up 6% as we invested in headcount, incurred expenses for our transformation program, as well as incremental costs from acquired businesses. We expect margins to further improve as we overcome supply chain challenges and realize additional benefits from our transformation.
Speaker 3: Adjusted Earnings Per Share was $0.34 driven by increase in gross profit and maintaining cost controls and operating expenses. This excludes costs driven by our transformation program, which will optimize our company for long-term value creation.
Speaker 3: We also recorded foreign valuation allowances of $5.8 million primarily associated with our Brazil entity.
Speaker 3: As a result, our adjusted net effective tax rate for the quarter was 47.6%.
Speaker 3: For 2023, we expect our normalized net effective tax rate to be in the 23-24% range. Moving on to slide 19.
Speaker 3: Infrastructure solution sales increase 27.1% to 238.4 million dollars in the quarter, primarily due to strong global demand for our solutions, especially equipment and favorable net, volume, pricing, and mix. Demand was up for both domestic and international sales.
Speaker 3: increasing 26.9% and 28.2% respectively. By-product, equipment sales were up 42.1% and part sales grew 6.6%.
Speaker 3: Second, the gross profit increased 34.3% to $48.2 million, and gross margin increased 110 basis points to 20.2%, primarily due to the impact of favorable volume pricing and sales and low acceptable accounting admins and low revenue example which means that the growth's
Speaker 3: Adjusted EBITDA margins expanded 280 basis points to 9.7%. Library of Chrome-D runter.
Speaker 3: Our material solution sales increased 39% to $109.8 million driven by strong global demand for equipment and parts along with favorable volume pricing and mix.
Speaker 3: Equipment sales grew 49.4% and parts were up 23.2%. Domestic sales grew 45.7% and international sales increased 24.5%. Segment gross profit increased 35.6% to $21.7 million.
Speaker 3: However, gross margin decreased 50 basis points to 19.8% due primarily to cost inflation and manufacturing inefficiencies this quarter that offset volume pricing and mix for the segment. The EBITDA margins for the segment increased 530 basis points.
Speaker 3: which caused EBITDA margin to expand 370 basis points to 6.3%.
Speaker 3: The positive contribution from volume, pricing and mix more than offset the impact from inflation. Negative manufacturing efficiencies due to supply chain disruptions are still having a lingering effect and SGA and E were slightly higher due to increased commissions, research and development costs.
Speaker 3: and the additional personnel associated with our mind's acquisition. Looking ahead, we continue to expect further benefit from price realization and the implementation of our transformation strategy.
Speaker 3: On slide 22, we show full year results. Strong demand enabled us to grow sales 16.3% and backlog 19.7%.
Speaker 3: Adjusted EBITDA crew 8.8% even with the various supply chain and manufacturing efficiency headwinds we encountered this year, which is a testament to the entire team for performing in a challenging environment. Turn it to slide 23.
Speaker 3: We continue to invest in growth, which brought our cash position down to $62.8 million, reflecting an increase in inventory and catbacks to meet demand and improve productivity and capacity. Our balance sheet remains solid and we expect our cash position to grow as we manage working capital and resolve supply chain disruptions. We continue to invest in our financial and financial and financial and we expect our cash position to grow as we manage working capital and resolve supply chain disruptions.
Speaker 3: Our liquidity and manageable debt enable us to withstand a variety of economic situations, as well as support investment plans and return cash to shareholders. Should we need to incur higher debt levels in the future, we will strive to operate between 1.5 to 2.5 times net debt to EBITDA.
Speaker 3: Turning to Site 24, we maintain a disciplined framework to capital deployment, balancing investments and growth with returning cash to shareholders. In 2022, we spent $41 million on catbacks to invest in projects to improve operational efficiencies and advance our long-term strategy.
Speaker 3: We also spent $18 million for the acquisition of mines earlier in the year to build out our digital platform. Our commitment to return cash to shareholders was demonstrated in the fourth quarter as we repurchased $4 million in shares and increased our quarterly dividend 8.3% to 13 cents per share.
Speaker 3: We will begin to see benefits in the second half of this year as the first waves of solutions are utilized. I am proud of the work our team is doing and excited as we draw a nearer to delivering the subjective.
Speaker 2: I will now turn it back over Keiako for his closing comments. Thank you Becky. Turning to slide 26, I would like to review our key investment highlights. Thank you.
Speaker 2: Despite all the changes we saw in 2022, one thing that has remained constant is our customers' desire for our unique solutions. We have built a leadership position by delivering innovative, high-quality products and superior customer service.
Speaker 2: And our markets are experiencing positive, long-term demand drivers from secular trains such as population growth and aging infrastructure.
Speaker 2: And our markets are experiencing positive, long-term demand drivers from secular trains such as population growth and aging infrastructure. We have been successful in winning business opportunities.
Speaker 2: As the global installed base of Aztec products grow, it creates the need for reliable aftermarket parts that tends to be reoccurring and lexical. This strong OEM aftermarket combination coupled with improving operational excellence improves our financial returns. As a result, we have a strong balance sheet that enable us...
Speaker 2: As the global installed base of Aztec products grow, it creates the need for reliable aftermarket parts that tends to be reoccurring and less cyclical. This strong OEM-aftermarket combination, coupled with improving operational excellence, improves our financial returns. As a result, we have a strong balance sheet that enables us to strategically invest and grow.
Speaker 2: Finally, our commitment to the simplified focus and growth strategic pillars unites our organization and drives improvement in everything we do. We saw improvements in nearly all financial metrics in 2022 and have made progress on achieving our long-term financial targets, shown on slide 27. The plans we have in place, including the article implementation, plus our team's actions to live out our core values daily, gives us confidence that these targets are attainable and that 2023 will be a good year for us.
Speaker 2: and what we can accomplish together in 2023 and beyond. With that, operator, we are now ready to open the call for any questions. At this time, I would like to remind everyone in order to ask a question, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Your first question is from the line of Meg D'Ollbreg with Baird. Your line is open. Hey, good morning, guys. It's Jorgerbouc Gant from Meg this morning. Hey, morning, Joe. Good morning. Morning, Joe.
Speaker 4: Good morning, good morning. So, Jocco, you've been in your new role for about 60 days. Obviously, you're not new to Aztec, but you are new to the CEO role. Any initial observations in addition to your prepared remarks from your new broadened perspective? Yeah, absolutely, Joe, and nice to talk to you this morning. You know, the first 60 days, I visited 12 of our US facilities, and I met with a significant number of people on all levels of organisation.
Speaker 2: And one thing that's really clear to me is that we have a lot of good people in our organization, a lot of people that's really focused on delivering results for us. I've also spent quite a bit of time talking to customers, visiting various industry events, specifically the National Asphalt Paving Association. And the market is very positive, our customers has a lot of work to do. And obviously that provides us some confidence for this year. We've also made some structural changes on our executive leadership team.
Speaker 2: even more important, our customers are very positive this time.
Speaker 5: Got it. Okay, great. Thanks for all that color. I guess my next question would be, you know, it looks like guidance is still suspended. Becky did mention that you expect margins to continue to improve, but any other thoughts or color you could give on 2023 earnings drivers?
Speaker 2: Yeah, I mean, obviously as part of our simplified focus and grow, we're going to continue to drive our operational excellence. I think we have strong teams in place now. As you guys know, the volatility in the supply chain is still there. Our teams are working hard to minimize supply chain disruptions. And as that improves, we should see a positive effect on margins. Still pricing is a little bit fluctuating, as you guys really well know. We've seen still pricing moderating a little bit. Our ever recently turning back upwards.
Speaker 4: The other positive thing is that we have seen some stability with regards to employee turnover and actually our ability to hire employees. And that will help us as well, creating a stable environment and improving efficiencies and manufacturing. We invested significant amount of money last year in CAPEX and those projects as I walk through our facilities is very visible. Equipment is getting commissioned and the benefits are starting to flow through our operations. And we continuously working on pricing. As you guys see, we've had a positive effect on pricing this year and we're going to continue to work on that. Okay, and if I can squeeze in one more last question, you know, your sales in the quarter were the highest cent of the pandemic by a pretty sizable amount, yet the drag on EBITDA for many factors.
Speaker 4: out of the shop. So I'm positive that you will see that turn around here in the first Scob Traga in.
Speaker 6: Got it. Okay. Thank you for taking all my questions. Your next question comes from the line of Stanley Elliott from Stafel. Your line is open. Hey, good morning, everyone. And, Jaco, welcome to the call. Good morning, Stanley. Yeah, good morning. Could you talk about maybe what happened on the part sales and the material group? A big improvement there. Was that just an improvement on the supply...
Speaker 4: in the material solutions business and created the short disruption in the flow of parts. So our teams have been very focused on reducing backlog in that business and those are also starting to show up. Our teams have also been successful in leveraging our international footprint by getting additional capacity out of our international sites to support that business. So, you know, as the move...
Speaker 4: plays out and as we get to the team's back performing before, you know, like before we close the facilities, I think those results will continue to be positive. You mentioned international a couple of times in the call, the nice international background with previous positions. Help us, from memory, you know, legacy aspects, I've had some issues on the manufacturing side and on the distribution side in the international. Let's both on the margin side. What do you think that you can bring the table or what do you think that the company is going to do differently this period so that you the international margins and growth profile can be not dilutive or a creative even to what you are doing here in North America? Yeah, good question again Stanley. So, you know, my view on international is that that is a significant opportunity for our organization. You know, if you look at our traditional market shares, obviously the US is much stronger for us. And I see the international as the international market is a great opportunity for us. However, you know, we need to be smart about it and make sure that we have the right manufacturers to be able to make food brands and the right supply chain processes.
Speaker 4: So, you know, in our future growth, you know, as we make our plans to grow internationally, finding the right footprint and the right supply chain processes will be important for us. You know, delivering products out of the US is not always the best solution and will not give us the same margin. So, leveraging our sites, which we've now started to do already that we have, is it really important? And then, you know, when the time is right, we will look for other opportunities. Staley, I would add to that, that under our decentralized structure previously, as Yaku said, exporting to those sites, you know, we weren't structured to fully optimize, you know, getting product to those sites, but we want to ask to, considering those as manufacturing sites, it opens up a lot of opportunity sports.
Speaker 4: And one other question, one other comment is, you know, we are in basting in specifically, you know, our site in Northern Ireland and Omar. And, you know, that facility will become a very important part for us to service the region there. So, you know, we're very well aware that if we want to have good margins and good profitable business, that we have to be local and we have to be graded at manufacturing and logistics in the local markets. That makes great sense. And, you know, switching gears to balance sheet, you know, if it toys are obviously just because of, you know, inflation and other things. Help us with the, where would you think inventory is going to finish into next year, end of 23? Maybe the implications for pre-cash flow, you know, what you want to talk about is a percent of EBITDA or net income. If you have a percent of EBITDA or net income conversion, anything along those lines would be great. Yeah, hi, Stanley. This is Becky. I'll take a step at that one. Our inventories are up year over year, but so is our backlog. And we've continued to see, you know, good order intake. And so we're really focused on, do we have the right inventory at the right location for that backlog support? So we have pockets where the backlog is locked. Okay.
Speaker 4: GNA. Yeah, Steve, good morning. So, you know, our Capix outlook for this year is in the range of 25 to 35 million. As you know, we invested heavily last year and the focus is obviously to extract all the benefits of those Capix investments.
Speaker 4: Yes, we did announce the limited restructure and we see an SGNA run rate of about 56 to 60 million and and Becky can maybe provide a little bit more color on the SGNA run rate.
Speaker 3: Sure, Steve, with that SG&A run rate, we do think we'll be pretty flat year over year on a percentage of sales basis. So we're trying to leverage the sales. So we should expect that to stay flat. We are taking some restructure, limited restructuring actions.
Speaker 3: Not necessarily all SGA and E, but we are also required minds, which is software engineers, and that all sits in SGA. So we have an uptick related to that acquisition because of where those people sit. So all in all, we expect that it will largely remain flat as it moves with sales. Also, as a reminder, we have ConnectSpo this year. So Q1, we always see an uptick and not that this is all SGA either, but just a authoritative network continuing to roll out our systems. And so we have some increments.
Speaker 4: Obviously, this was the first quarter we saw a backlog down. I know part of that is the significant fails increase. So maybe it was year end. But can you give any sense on order cracking to the early part of the year? Yeah, Steve, I can do that, you know, as I mentioned, when we met with significant amount of our customers set.
Speaker 4: just for January we've seen an $8 million uptick again in backlog. So good, good trade continuing. Right, great. Talk to a lot of companies that are sitting on very significant backlog. And it's provided them the flexibility to be much more aggressive on the pricing side. Simply because you're sitting on this much backlog, you can be willing to lose lower margin business. How do you think about that equation? Yeah, you know, good question. I think.
Speaker 4: know, if a customer buys and asks for a plan from us, you know, that customer has a lifespan on that equipment for 30 years and, you know, we definitely don't want to necessarily lose that opportunity as well. So, but we believe that our teams will be able to offset any additional inflation that he plays a food pricing.
Speaker 4: If a customer buys and asks for a plan from us, that customer has a lifespan on that equipment for 30 years. We definitely don't want to necessarily lose that opportunity as well. But we believe that our teams will be able to offset any additional inflation that he plays with pricing. It makes sense. Thanks everyone.
Speaker 4: Your next question is from the line of Larry Dumeria with William Blair. Your line is open. Hey, thanks. Good morning. I was a big increase in equipment sales. Just trying to dig that into a little bit more. So you talk about volume price mix, any big deliveries. I'm trying to understand if we're to catch up in production or if we're pivoting to better throughput at this point. Yeah, I mean, if you, you know, the reduction of backlog is obviously a function of of getting additional volume out. I will say that, you know, our teams have done a really good job implementing some significant capex projects. We've also over the last year invested significantly in manufacturing, engineering capability. And those teams are starting to deliver results by helping us to reduce our manufacturing the times and cycle times. So I'm positive that we will see further improvements in our outputs versus what we are in prior years. You know, the fact that
Speaker 4: that supply chain is still disruptive in some of our lines. Makes it a little bit unpredictable, but with that getting better, output will continue to improve over the next couple of quarters. Thanks. And then, I'm going to draw two questions to one here. But you talked about dealer's mansion, strategic accounts. And you also mentioned digital connectivity and telematics. Can you maybe just give us a right setting of where we are in those multiple journeys? Where we've come from where we are now and how much more would there is to chop? Is all the equipment going out connected with telematics now or is that in the future or just kind of right level on those issues if you can? Yeah. So I will take it in three steps there. So let's talk about the dealers. I mean, if you look back at the Aztecs, he's the community. We were primarily a direct market player. And on the mobile equipment side, you know, the teams have now significantly transitioned to dealers. And what happened last year was the teams have really put good structure in place around how we manage dealers. How do we agree on performance with the dealers and that process in my mind is?
Speaker 4: is really going to drive the performance of our dealers. Our teams have also been successful with expanding dealers across the country. And we still have a few white spaces in the US, but overall, the guys have done a really good job expanding that. So I will say really good progress on the dealers side, on the strategic account side. This is something that I'm very passionate about. As we see consolidation in our customer base, we need to be good dealing with the larger customers. And our teams have now, I think, found their strides on that. They still a lot of work to do for us. But I think we just can see that improve in the future. On the telematics side, I think we are doing a great job. We have a really early day. We have the minds acquisition, the graphical acquisition of about two years ago. Taking and putting all of those things together, with the current technology we have, is something that we are working on right now. And at Connexpo, we will actually exhibit some of the new products. But they still are significant runway and work to do. And before we have all the technology on our equipment.
Speaker 1: Okay, very good. Thank you very much. There are no further questions in the queue. I'd like to hand the call back to Steve Anderson for closing remarks. All right. Thank you, Brent. And while we're talking about it, you know, anyone who's going to be out in Vegas for context, but please stop by our booth and central hall and see us. We'd love to show you some new things that we have on display there. So thanks for that. And you know, we appreciate your participation on this call. And thank you for your interest in Aztec. As today's news release indicates, today's conference call has been recorded. A replay of this conference call will be available through March 15th. And an archive webcast will be available for 90 days. The transcript will be available under the investor relations section of the Aztec Industries website within the next.