Q1 2023 Astec Industries Inc Earnings Call
Speaker 2: Hello, and welcome to the Aztec Industries first quarter earnings call. As a reminder, this conference call is being recorded. It is my pleasure to introduce your host, Steve Anderson.
Speaker 2: Senior Vice President of Administration and Investor Relations. Mr. Anderson, you may begin.
Speaker 3: Thank you and thank you everyone for being on our first quarter, 2023 earnings call. Joining me on today's call are Yaco Fundromerva, Chief Executive Officer, and Becky Weinberg, our Chief Financial Officer.
Speaker 3: In just a moment, I'll turn the call over to Yaku 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.
Speaker 3: These non-GAAP financial measures have no standardized meaning prescribed by U.S. 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 3: A reconciliation of GAT to non-GAT results are included in our news release and in the appendix of our slide deck.
Speaker 3: All related earnings materials are posted on our website at www.asticindustries.com under the investor relations and presentations tabs. And now I will turn the call over to YACO.
Speaker 4: Thank you, Steve. Good morning, everyone, and thank you for joining us. I would like to begin my comments with the key messages summarized on slide four.
Speaker 4: We had a great start in 2023 as a global Aztec team delivered unique solutions and outstanding service to our customers.
Speaker 4: despite facing a challenging and dynamic environment. The more and the more favorable across our business and customers engagement is positive.
Speaker 4: Tailwinds from highway funding along with excitement about our new products and solutions are pushing revenues higher and keeping up backlog at elevated levels.
Speaker 4: As a result of the strong performance of the entire Aztec team, we delivered year-over-year growth in net sales of 19.5% in the first quarter and expanded adjusted EBITDA margins 360 basis points.
Speaker 4: These are great accomplishments and I'm proud of the contribution from everyone across our organization.
Speaker 4: Internally, we are elevating our performance and execution to achieve objectives as we unite with a sharpened focus on the one-astic operating model.
Speaker 4: As I travel to meet employees, I'm encouraged by the embracement of our operating model to drive more consistent results.
Speaker 4: especially while facing volatile economic conditions.
Speaker 4: To further drive the performance culture into our operations.
Speaker 4: We are implementing a number of initiatives.
Speaker 4: One major project is heating a significant milestone this month as we go live with the Oracle Cloud ARP at one of our manufacturing sites.
Speaker 4: Finally, our key messages conclude with execution against our simplified focus and growth strategy to drive sustainable shareholder value. We will say more about these key messages during the call today. Turning to slide five, I would like to share with you my early observations of often nearly four months at CEO . Our team is highly engaged and energized. We have a clear focus on the living results.
Speaker 4: as I visited local sites.
Speaker 4: The team understands the value that Aztec brings to our customers and our eager to elevate their performance.
Speaker 4: so we can ingrain a culture of continuous improvement and operational excellence.
Speaker 4: I have the privilege to frequently meet with customers, including at the recent CON-Expo event, and I can attest that sentiment remains positive. They have a long runway with projects to bolt out and upgrade infrastructure, and we are proud to partner with them in serving the ROC to road value chain. Finally, we have an aligned and united executive leadership team that has driven and committed to achieving our long-term goals.
Speaker 4: the privilege to frequently meet with customers, including at the recent con-expo event. And I can attest that sentiment remains positive. They have a long runway with projects to bolt out and upgrade infrastructure. And we are proud to partner with them in serving the Rock to Road value chain. Finally, we have an aligned and united executive leadership team that has driven and committed to achieving our long-term goals. These factors combined.
Speaker 4: to give me great confidence as we progress in 2023. The priorities for Aztec in 2023, shown on the right hand side of the slide, are the same ones that I shade last quarter.
Speaker 4: Executing on Simplify focus and growth strategy.
Speaker 4: and delivering on our commitments to employees, customers and shareholders. This will remain our focus.
Speaker 4: covering on our commitments to employees, customers and shareholders. This will remain our focus. Turning to slide six.
Speaker 4: I would like to spend a few minutes discussing our Simplify, Focus and Grow strategy while updating you on the progress we have made.
Speaker 4: in a few minutes discussing our simplified focus and growth strategy while updating you on the progress we have made and our near-term priorities.
Speaker 4: As a reminder, the three pillars of our strategy are designed to create a performance culture and provide the organization with a common framework to fully unlock the value from ongoing strategic initiatives.
Speaker 4: and thereby maximising project returns.
Speaker 4: We continue to make progress on our simplified pillar. For an example, this quarter we completed the sale of our Tacoma facility.
Speaker 4: completing the consolidation that was announced in 2021.
Speaker 4: We are improving focus through operational excellence.
Speaker 4: For example, our ERP implementation is using significant milestones in May, with the launch of the solution at our first site.
Speaker 4: We continue to elevate aftermarket excellence by improving parts fill rate and driving down parts backlog, as well as introducing new technologies and capabilities that allow us to provide even greater customer service.
Speaker 4: Overall, our Simplify, Focus and Grow framework is driving the right behaviors and I am convinced that it will enable us to create value for employees, customers, partners and shareholders. We were thrilled to participate in the recent Con Expo Tradeshow and engage with customers.
Speaker 4: Flight 7 shows some key takeaways from the event. Ashtig was well represented at the show.
Speaker 4: This was the first con-exposence we launched our one ASTIC brand and we had a broad suite of products.
Speaker 4: and introduction of ASTIC digital, ASFORPLANT, Virtual Reality Station, a fully detailed scaled ASFORPLANT model, and two fully assembled concrete platforms. The positive multi-year outlook is driving customer engagement that exceeded our expectations. We were very pleased with the level of interest in our solutions. Turning to slide eight, I would like to provide an update on current business dynamics, and now we are responding.
Speaker 4: I have already mentioned the positive customer sentiment supported by strong demand for road building equipment and materials. This is driven higher sales and supported solid backlog.
Speaker 4: giving us confidence for 2023. Additional demand support is coming as funds are beginning to flow from the Federal Highway Bill.
Speaker 4: providing a stable and elevated source of funding for the next several years.
Speaker 4: As we consider the challenges in meeting this tomorrow.
Speaker 4: We are encouraged as the tight labour market started to ease.
Speaker 4: At the same time, wage inflation is normalized. These factors should help us as we stabilize our team and expand output to meet strong demand. Finally, we continue to deploy operational excellence initiatives and strategic pricing adjustments to align with input cost changes. We just finished with two applications. The Global Financial Services Commission is discussing the international fund? diplomats, a similar organization. I just hope it will help. First of all, I request a return from all of you to comment on the specific The Global Financial Services Commission.
Speaker 4: Backlock levels, while modestly below last year's quickly elevated levels, remain very healthy and supportive of our positive outlook. Over the last three years, backlock is increased 90%. Over the same period, quarterly revenue has increased 22%. Several observations emerged from this review of our backlock trend. First, we knew that backlock would ease from record levels as we improved output and supply chain constraints were resolved.
Speaker 4: However, they are still at historical high levels due to tremendous demand for our products.
Speaker 4: Second, our order activity has moderated as economic stability returned following a volatile period over the last two years.
Speaker 4: Third, the current level of backlog gives us clear visibility to demand for 2023.
Speaker 4: And fourth, we still have room for improvement as we work to convert backlog to revenue. I would also note our domestic dealer inventories remain below optimum levels, which is the source of future demand.
Speaker 4: We have several ongoing initiatives to expand output and increase capacity.
Speaker 4: These combined efforts should help us more effectively meet strong demand for our products and continue to convert backlog to sales. Turning to slide 10, we have identified key focus areas that we believe create value for our stakeholders as part of our ESG journey. Admittedly, we are still in the early phases of this journey. However, we are in motion and have established plans to make meaningful progress.
Speaker 4: I would like to highlight two examples that demonstrate success in our ESG journey. On slide 11, we tell the story of one of the many remarkable women at Aztec that are paving the way for women in manufacturing.
Speaker 4: Avril is the GM for our Franklin Boulevard site in Eugene.
Speaker 4: In this role, she leads a group of over 200 team members, producing and crushing and screening equipment, with the final material solutions portfolio.
Speaker 4: Her dedication and leadership are a true inspiration for all Aztec employees, and we are honored to have her and many other women like her on our team. On slide 12, we show how one of our products is making a difference by turning solid waste into a useful product.
Speaker 4: One of the bike products of road construction is green waste.
Speaker 4: vegetation that was clear to my way for the new or widened road.
Speaker 4: The Peterson horizontal grinder converts this waste that was destined for a landfill into valuable mulch
Speaker 4: that can be used for water retention, per-rosion control, compost, or overall aesthetic improvements to landscaping.
Speaker 4: This innovative product helps reduce waste and add value.
Speaker 4: We introduced our Aztec digital suite of solutions to the CON-Expo attendees with very positive reception. This is a very exciting initiative for us and it greatly enhances the customer experience, provides us with data that can be used to improve product performance and drive standardisation across the road value chain. As seen on slide 14, we are creating a digital ecosystem that our customers can leverage into competitive advantage in their business.
Speaker 4: ensuring they are using our product to their greatest advantage. Through internal development and our recent strategic acquisitions, we are connecting hardware to software by integrating telematics, connectivity, controls, and equipment to create actionable intelligence.
Speaker 2: Part sales also grew, improving 4.4%. By region, we achieved balance growth across our markets with domestic sales growth of 20% and international sales increasing 17.5%. As a reminder, US represents around 80% of our consolidated sales. Backlock decreased at the end of the first quarter, down 4.1% year over year and 12.3% sequentially.
Speaker 2: While off of peak levels, backlog remains elevated, up over 30% compared to our three-year average, giving us strong confidence in our 2023 expectations. By segment, Infrastructure Solutions backlog decreased 0.8%.
Speaker 2: and material solutions decreased 10.3%. Domestic backlog was down 3% and international down 10.3%.
Speaker 2: As Jack mentioned earlier, we have continued to make investments in improvements in operations to increase output. We anticipate converting more backlog to sales as these improvements are implemented and a supply chain constraints continue to ease.
Speaker 2: Adjusted EBITDA increased 87.2% to $35.2 million. Expanding adjusted EBITDA margin 360 basis points to 10.1%.
Speaker 2: This was primarily due to the net positive impact of volume pricing and mix that outpaced inflation, higher manufacturing costs, and increased operating expenses.
Speaker 2: We continue to face lingering inefficiencies in the supply chain, creating a headwind to gross margin. Despite this, we expanded gross margins by 340 basis points to 25.6 percent as we achieve higher volumes with favorable mix and further price realization. As GNA increased due to costs related to CON-Expo,
Speaker 2: higher personnel costs, and incremental costs from acquired businesses.
Speaker 2: We expect EBITDA margins to further improve as we overcome supply chain challenges and realize additional benefits from our transformation.
Speaker 2: Adjusted earnings per share more than double to 90 cents driven by improved operating margin as we optimize and simplify for improved long-term value creation.
Speaker 2: Our adjusted nadefective tax rate for the quarter was 25.2%. For 2023, we still expect our normalized nadefective tax rate to be in the 23-24% range.
Speaker 2: Moving on to slide 17. Infrastructure solution sales increased 16.4% to $229.9 million on strong global demand, especially for equipment and favorable net value pricing and mix.
Speaker 2: Demand was up for both domestic and international sales, increasing 14.3% and 27.9% respectively.
Speaker 2: By category, equipment sales were up 17.3% and part sales grew 5.2%.
Speaker 2: Segment operating adjusted EBITDA margins expanded 360 basis points to 11.9% due to net positive volume mix and pricing outpacing inflation.
Speaker 2: This was partially offset by net manufacturing any efficiencies, higher personnel costs, kind of an export trade show cost, and other SGNA expenses.
Speaker 2: Turning to slide 18, our material solution sales increased 21.6% to $113.9 million driven by strong domestic demand and a significant increase in equipment sales.
Speaker 2: Favorable volume pricing and mix also contributed to the increase in segment sales.
Speaker 2: equipment sales grew 34.5% and parts were up 2%.
Speaker 2: Domestic sales grew 31.4% and international sales decreased 4.2%.
Speaker 2: Segment operating adjusted EBITDA margins increased 40 basis points to 13.4%. This was largely due to net positive volume mix and pricing, outpacing inflation, partially offset by manufacturing inefficiencies, lower FX gains, and higher ConExpo trade show costs. I will also note that we saw sequential margin expansion across the two markets.
Speaker 2: key drivers of our year-over-year adjusted EBITDA bridge. EBITDA improved 87.2% to 35.2 million dollars which caused EBITDA margin to expand 360 basis points to 10.1%.
Speaker 2: The positive contribution from volume, pricing, and mix more than offset the impact from inflation.
Speaker 2: We also achieved positive contributions from acquisitions. Supply chain disruptions are still having a lingering effect on manufacturing efficiencies, and SG&A was slightly higher due to higher personnel costs and expenses related to ConExpo events.
Speaker 2: Looking ahead, we continue to expect further benefit from price realization and the implementation of our transformation strategy to drive increased EBITDA to deliver on our long-term targets.
Speaker 2: Turning to slide 20. Our cash position decreased to $39.6 million as we secured inventory to meet demand.
Speaker 2: CAPEX was slightly lower than last year and we received $20 million for the final sale of our previously closed Tacoma facility.
Speaker 2: With ample liquidity and mo-dette, our balance sheet remains solid and we expect our cash position to grow as we manage working capital and resolve supply chain disruptions. We have the financial strength to a standard variety of economic situations as well as support investment plans and return cash to shareholders.
Speaker 2: Our current net leverage ratio is low, which we think is prudent given elevated inflation, rising interest rates, and broader macro uncertainty.
Speaker 2: Over the long run, our target leverage range over the cycle is between 1.5 to 2.5 times.
Speaker 2: For the long run, our target leverage over the cycle is between 1.5 to 2.5 times. Turn it aside 21. Turn it aside 21.
Speaker 2: on CapEx in the first quarter to improve operational efficiencies and advance our long-term strategy and maintained our commitment to return cash to shareholders with our quarterly dividend. Our Oracle transformation is summarized on slide 22.
Speaker 2: This month we went live with our first facility and corporate. It is still early days and while there are always some elements that need to be fine tuned after the system is activated, I'm very pleased with the launch. We expect to see benefits from the implementation in the second half of this year with additional incremental improvements to follow as we optimize the system.
Speaker 2: fully integrated into our workflows, and begin to go live at other sites in 2024. I will note that while we work through the initial phases of the launch, we do anticipate some production disruption in our second quarter. Our operations teams are prepared for this and are ready to mitigate any temporary impact on customer delivery.
Speaker 4: to slide 23.
Speaker 4: I would like to remind you of our key investment highlights. We have built a leadership position within attractive niche markets.
Speaker 4: These markets are benefiting from long-term secular trains, including population growth, urbanization and aging infrastructure.
Speaker 4: that gives us confidence in our outlook. These leadership positions have been built by delivering products and services with a reputation for innovation enhanced by the integrated ASDAQ Digital Platform. This has helped us grow our installed base.
Speaker 4: setting up an environment for our aftermarket excellence initiative to grow this revenue stream that is more stable and higher quality.
Speaker 4: As revenue and earnings improve, we further strengthen our balance sheet to provide the liquidity needed to fund our growth initiatives.
Speaker 4: These actions combine to further our simplified focus and growth strategic evolution.
Speaker 4: driving sustainable profitable growth as we strive to achieve our long-term goals shown on slide 24. In closing, we are performing well and optimistic about 2023.
Speaker 4: We are making progress on our transformation as we drive a culture of performance through execution.
Speaker 4: I am confident that our team is capable of meeting these expectations and excited about what we can achieve together.
Speaker 2: With that operator, we are now ready to open the call for questions. Thank you. At this time I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad.
Speaker 5: We'll go first to Mig Dobre at Baird.
Speaker 6: Thank you for taking the question.
Speaker 6: Good morning everyone. Thank you for taking a question. Morning, Mike. Morning, Mike.
Speaker 6: I'm curious to get a little more context from you guys in terms of where you see demand. I appreciate the fact that your shipment is in the quarter to customers where...
Speaker 6: were good, increased, but at the same time, your order intake declined significantly, both sequentially and year over year. So in terms of where demand currently lies as it manifests itself through orders, I think
Speaker 6: something seems, at least to me, quite a bit different than what we had, call it nine to twelve months ago, so perhaps you can comment on that to kind of get us started here.
Speaker 4: Yeah, I may get you out here and maybe I can take that to start. I think you've heard from other companies in the market as well. There's a very positive environment. Yeah.
Speaker 4: supported by the long-term infrastructure bill. You know, over the last couple of months, I've had good fortunes to meet many of our customers. And actually yesterday I had a meeting with all our top dealers. And expectation from them is still strong. All our customers are very strong.
Speaker 4: We do expect the moderation in backlog, and we are also very focused on driving backlog down, especially on parts. For us, that's really important that our customers have the necessary parts to support their operations, and we are really focused.
Speaker 4: around that. You know, the other thing that I see that will support, you know, strong order take in taking the future at Conexpo, as you saw, you know, we had multiple new products and, you know, our customers are very excited about those. And as soon as we start launching those products, you know, we will see that there might end up working without pays announcements, damit pay no money, but there is
Speaker 4: we'll see strong demand continue for these new products.
Speaker 4: But once again, it's important to realize and also look at our backlog and see where it lies in comparison with our historical averages.
Speaker 6: Well, I guess I appreciate your comment on backlog. But look, I mean, there's basically two ways in which backlog comes down. You can increase your production, which you've done and you're talking about doing more of that. The other way the backlog comes down is by...
Speaker 6: orders coming down materially. And this is exactly what we've seen last quarter. We're seeing it again this quarter. And
Speaker 6: orders are typically an indication of where true and market demand lies right now. Is there something that is somehow skewing orders, currently, that you're aware of or that we need to be aware of? No, I mean, I'm not aware of any systemic issues or problems.
Speaker 4: And once again, as I mentioned earlier, I feel that our customer base is very optimistic about the future, the amount of work that they have. As we are improving our capacity and driving lead times down.
Speaker 6: Obviously our customers are gaining more confidence in our ability to supply with shorter lead times. So from my side, no. So the client and orders could have something to do with your improving lead times and maybe customer orders normalizing as it relates to that.
Speaker 6: I guess I'm curious, is you look at the order intake that you have had over the past couple years, which has resulted in this sizable backlog build? Is it possible that the demand associated with the infrastructure bill and all the projects that I think all of us have been anticipated for some time has actually been pulled forward? And this is sort of what creates this apparent hangover that we're witnessing right now.
Speaker 4: Yeah, I mean, if you look at the significant slope of order intake in the last year or two, obviously there was some buying from the market due to the uncertainty in supply chain. And as demand normalizes, I think the backlog will normalize.
Speaker 4: One thing that came out very clear yesterday in the discussion with our dealers, our dealer inventory is still very low. Especially if you look at the mobile road construction and equipment, lead times are well into next year. And the dealers, the feedback we got from them is that they see...
Speaker 4: a strong remainder of 2023 and that they expect 2024 to continue at least at the same level as this year. So I think we're just seeing a moderation with supply chain and lead to home stabilizing. Final question for me. How are you sort of thinking about managing capacity here?
Speaker 6: You're increasing this capacity in the near term, but clearly the backlog is coming down and as we already discussed, the orders have softened considerably.
Speaker 6: Do you sort of run the risk of having to curtail production into 2024 and how much flexibility you have to do that?
Speaker 4: Yeah, now good question and we are absolutely reviewing our capacity versus the band-mink. The good thing is, you know, year over the last year or two, we've done a great job implementing structured sales and operations planning process.
and that has given us very good visibility on where do we have a shortage of capacity and where we potentially have excess capacity and the teams are managing that. We have multiple levers that we can pull.
changes as needed. Our sales and operations process have really helped us to give us good visibility.
The other thing also to remember is we've done some significant prior footprints rationalizations and those changes will come in and support if the market does pull back. I feel like that the teams have good visibility and we already have.
good plans in place if there's any moderation taking place.
Great, thank you. We'll move next to Steve Verrazani at Soudodi. Good morning, everyone. Thanks for the detail on the call. I did want to ask about cash flow. Given the amount of backlog conversion this quarter, I would have expected
there would have been completion of a lot of WIP and that would have brought down inventory, but it actually grew again. Can you give us a sense of what what what's coming through right now? And is that not the case that you're completing a lot of WIP right now? Good morning, Steve. I can take that. We had several uses of cash, but certainly on the inventory we did see inventory.
and now they're happily to read happy to report they're producing again. So we did see it come down where we expected it to come down and then we had pockets where it went up and like I said largely due to the one site going live with Oracle. One other comment. Sorry Steve just to support.
them as well. And then just a last comment on that, you know, the same as, as it takes a while to, to ramp up the whole supply chain for higher for higher sales. You know, if if if backlog comes down, you know, bringing that inventory down will will take a quarter or two.
Our teams are really focused on that because we understand that that potentially has a risk for us. But right now we have really good visibility on it and the teams I feel have pretty good control over it. Let's see you mentioned the Oracle implementation and any concerns.
Nope, we're staying the course. Everything is going quite well. We don't have any other rollouts planned for this year. We've already done quite a bit this year and in the back half of the year we'll finish working on the design for our engineer to order sites and then the next sites will go live in February 2024. There will be two sites.
Day one was a huge milestone for the team. So we did that manufacturing ran as normal, which is great. So now we are entering day three and the statistics of shipments and activity is just growing. So I will say, this was a great win for the Aztec team and.
is the reason for the negative this quarter, given you obviously did get a lot more volume out the door? Yeah, Steve, it's Jafri here, I can take that one. Actually, the description there is maybe a little bit misleading. Most of that inefficiency there was...
related to warranty cost, inventory variances and some service variances. Actually, if you look at our manufacturing absorption, we were very close to Braykeven. So right now, I think we have really balanced our labour with the number of hours that we put out.
I'm in that number in detail and those are not related to manufacturing as such.
just continue to improve.
to improve. Thanks, Yaka.
As a reminder, if you would like to ask a question, please press star 1. We'll go next to Brian Sponheimer at Gabelli Funds. Hi, good morning, Yaako, Becky, and Steve. How are you?
You mentioned in the release and in your prepared comments that you're starting to see some of the infrastructure money flow through. Can you maybe give some examples as to where you're seeing that and...
Maybe just some evidence that this bigot has actually started. Yeah, absolutely. I mean, actually, as I said, I spoke to our dealers yesterday and multiple of our sales leaders are actually here in Chattanooga this week.
You know, it's all over. Some significant lettings coming out of Texas. Arkansas have had programs that's stronger than what they've ever seen. Georgia, Tennessee, I mean, it's really all over. And I think most of our customers have seen
for some of the positive contribution in the quarter.
What are we looking for as far as carryover pricing into this year and what have you done?
in the four months as CEO that maybe has changed some of the way that you go to market from a price perspective? Yeah, good question. You know, for me, always the first thing to focus on is, you know, we need to get value for the product that we sell.
Our teams are very focused on that to get the right price for our products. We are very in tune with any price changes on components and we are now updating pricing, especially on parts on a real-time basis. So as soon as price increases came through from suppliers.
We are adjusting those so much more reactive than what we were in the past.
And then of course, you know, with long lead times we have a lot of pricing in our backlog and we feel pretty good about the pricing that we actually have in the backlog. And then the last thing is, you know, obviously with lead time going into 2024, we've been been very proactive and have already started to adjust pricing on our...
on that. And I think with the processes that we've put in place here in the last two years, we actually have the ability to react very quickly, both up and down, when needed.
Okay, I appreciate that. Thank you very much and best of luck for the rest of the year. Thank you. We'll take our next question from Larry Damaria at William Blair.
Hey, good morning and thank you. I just trying to understand some of the messaging on sales and orders. Obviously, we're around 350 level sales here, a couple quarters. You know, as high as we can go in this environment and given where the backlog is and
and capacity at center supply chain. In other words, is that kind of a run rate for the rest of the year? Could we go higher from there? Or is there gonna be more seasonality? Can you just kinda help us think about the cadence and where we can go from here given that we've been at that level a couple quarters now? Yeah, so if you look historically...
So one is definitely one of our stronger quarters from a capacity point of view, you know with operational excellence activities implemented and in basements I think we can go higher in terms of capacity from sales from a capacity point of view
So, you know, we've definitely, we have those levers to pull if, if the months pop higher than what we had in the last year or two, but I will say Q1, stronger, stronger quarter in a year and then typically, you know, Q4, so a pretty strong quarter for us.
Okay, so still some normal seasonality, but obviously we're starting out the year on a stronger note. Maybe we could do the same thing around either gross margins or EBITDA margins, obviously nice work, and you noted you're getting good pricing in the backlog. So how do we think about margins as we progress through the year two? Are we at a...
Structurally higher level now in 2023 or you know follow the same seasonal patterns But but at higher levels or how do we think about this because obviously they've been volatile over time I think you know before we gave that target range of the 24 to 25 percent range and
You know, we feel pretty comfortable in those ranges. Obviously in Q1 is a very strong part of the coach for us. So, you know, that's typically the high quarter of the year.
And, you know, with the quality of earnings for parts that are contributed to high margins for Q1. So I'm sorry you broke up. You were in saying 20, 40, 25 for this year, right? Where were you?
So yeah, so I mean we say the ranges for you know margins of 24 to 25 percent we believe that we will be within those ranges.
Larry, you're breaking up. I can't tell if you have any other questions.
Good luck. Thanks, Larry. Thanks, Larry. And there are no further questions in the queue at this time. I would like to hand the call back to Steve Anderson for closing remarks.
All right, thank you, Audra. We appreciate your participation on your conference call today. Thank you for your interest in Aztec. As our news release indicates, today's conference call has been recorded. A replay of this conference call will be available through May 17, 2023. An archived 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 seven days. This information is contained in the news release distributed earlier this morning. This concludes our call, but I'm happy to connect if any of you have additional questions. Thank you all. Have a good day. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.