Q1 2023 Simpson Manufacturing Co. Inc. Earnings Call
Greetings.
Welcome to the Simpson manufacturing company first quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
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I'll now turn the conference over to your host Orlando you may begin.
Good afternoon, ladies and gentlemen.
To Simpson manufacturing company first quarter 2023 earnings conference call.
Statements made on this call that are not statements of historical fact are forward looking statements.
Statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties.
Actual future results may vary materially from those expressed or implied by the forward looking statements.
We encourage you to read the risks described in the company's public filings and reports, which are available on the S E T or the company's corporate website.
Except to the extent required by applicable securities laws.
Undertakes no obligation to update or publicly revise any of the forward looking statements that we make here today, whether as a result of new information future events or otherwise.
Please note that the company's earnings press release was issued today at approximately 415 P M Eastern time.
The earnings press release is available on the Investor Relations page of the company's website at IR not since then F. G dotcom.
Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website.
Now I would like to turn the conference over to Michael Laski, Simpson's President and Chief Executive Officer.
Thanks, Kim and good afternoon, everyone and thank you for joining today's call with me today is Brian <unk>, our Chief Financial Officer.
Remarks today will provide an overview of our financial results key growth.
<unk> capital allocation priorities.
Bryan will then walk you through our Q1 financials and fiscal 2023 outlook in greater detail.
Net sales in the first quarter totaled $534 $4 million, an increase of eight 3% year over year.
In North America are net sales of $406 $3 million declined seven 4% year over year, primarily due to lower volumes.
Significant precipitation in the West coast during the first quarter drove materially softer sales.
Residential end market contributing to the decline.
As a reminder, builder's he's a higher volume of simply turning homes in the western and southern regions of the United States to meet stricter building codes that address higher wind seismic requirements.
In our commercial end market sales also declined year over year, However, revenues from our sales to OEM customers, although small increase year over year.
We continue to believe our North American net sales will be pressured by softer housing market in 2023, we expect to maintain our industry leading position as the partner of choice due to our strong business model and competitive differentiators.
These include an increasingly diverse portfolio of products and software and a commitment to develop equally solutions for the markets we serve.
The dedication to innovation extensive product engineering and research and testing in a state of the art lamps.
Unparalleled product availability and delivery standards on our vast product offering across multiple distribution channels with typical delivery within 24 to 48 hours.
Field support technical support literature of digital tools to help select specify our products and online ordering tools to make it easier to do business with us.
In our long standing reputation relationships and engagement with engineers elite officials and contractors to discern any safer stronger structures and improved construction practices, along with helping to develop talent my career opportunities alleviate labor shortages in the construction industry.
In addition, we remain focused on continued growth in our five end use markets many of which are not tied to U S housing starts.
I will touch on our progress there in a moment.
Turning to Europe first quarter sales totaled $124 $2 million.
Including Europe net sales was an $80 million contribution from the tango, reflecting a modest year over year increase.
Our net sales were partially offset by lower sales volumes, resulting from ongoing macroeconomic challenges in Europe and foreign currency translation.
In its April 1st Mark the one year anniversary of the Taco acquisition.
I'd like to comment on our progress key learnings and synergy accomplishments to date.
The acquisition was accretive to our earnings in the first quarter of 2023, and we remain on track with our defensive synergies a procurement optimization footprint rationalization and manufacturing and operating expense efficiencies.
In regards to our office of synergy opportunities.
While we have made strides to expand our market share and cross selling opportunities in several countries. The continued persistent weakness in the European macroeconomic climate will delay some of our office of synergy opportunities.
Longer term, we remain confident in the health of our business model in Europe .
And all of our operating segments, we believe our ambition to outperform the housing market will be supported by a broader set of offering to our customers.
Along with the ongoing transition to wood construction and regulatory requirements and encourage new construction solutions.
Our consolidated gross margin for the first quarter was 47, 3%.
Reflecting strong cost control.
Our first quarter operating margin of 22, 1% was pressured as expected on a higher cost environment as well as ongoing planned Taco integration expenses.
We remain committed to ongoing expense management and executing the areas of our business that we can control.
Brian will elaborate further on the key drivers of our margin performance shortly.
I'd now like to turn to a discussion of end use markets, which encompasses our growth initiatives.
We made solid traction through the first quarter in a challenging environment.
First beginning with our commercial market in line with our growth initiatives will be the partner choice, our inventory availability and rapid delivery standards resulted in various new customer wins as well as new product launches at sport and structural steel initiative.
Second in our OEM market, we are seeing strong growth across all OEM customer types, who continue to work on developing the market for mass timber one of our key focus.
Focus areas it's.
This aligns with our initiative to be the innovation leader in the markets we operate.
And third with.
The national retail space and it's part of our focus on growing our business above market relative to U S housing starts.
We continue to show positive traction on or outdoor accent line my broadly expanding our offering into many home centers during the first quarter.
We are very pleased to have our industry, leading offerings prominently displayed by our home center customers driving further brand recognition and promoting product sales.
Turning now to capital allocation.
Our priorities remain focused on organic growth opportunities returning value to our stockholders via dividends and opportunistic share repurchases and paying down the debt we incurred to finance the acquisition of a taco.
With regard to organic growth, we are focused on key investments to strengthen our business model, including our growth initiatives and the integration of a technical one.
We're also continuing to evaluate expansion opportunities to support and maintain our industry, leading position such as our previously announced Ohio manufacturing and distribution facility.
As well as our equipment investments to drive productivity and maintain our best in class customer service.
While finalizing the integration of the tanker remains our priority we continue to evaluate potential M&A opportunities that would accelerate our key growth initiatives and strengthen our business model and manufacturing efficiencies.
Looking ahead, while we expect the operating environment in 2023 will remain choppy, we are confident in our ability to continue to achieve our company ambitions.
Our goal to grow above the market relative to the U S housing starts with profitability in the top quartile of our proxy peer group.
Our progress will be supported by our strong business model and our commitment to remain responsible stewards of capital along with anticipated growth in our five end use markets and the dedication of our 5000 plus strong Simpson employees.
Simpson's mission was created by our founder Barclays. Since then and as values remain the cornerstones of how we operate our business today.
A key component of our business model is to maintain our long standing relationship with engineers that we put officials and contractors to improve construction practices.
Our actions include training, our customers and hosting national programs that provide educational content for the building industry at large.
We believe these efforts further helped to maintain our leadership role in industry knowledge and development dry brand awareness.
Informed customers about new Simpson products, and innovations and help attract new customers.
We are proud to play a large part in educating and empowering our industry as we further Barclays mission to help people design and build a safer stronger structures.
With that I'd like to turn the call over to Brian who will discuss our first quarter financial results in greater detail.
Thank you, Mike and good afternoon, everyone I'm pleased to discuss our first quarter financial results with you today.
Before I begin I'd like to mention that unless otherwise stated all financial measures discussed in my prepared remarks today.
Part of the first quarter of 2023, and all comparisons will be year over year comparisons versus the first quarter of 2022.
Now turning to our first quarter results as Mike highlighted our consolidated net sales increased eight 3% to $534 $4 million.
Within the North America segment, net sales decreased seven 4% to $406 $3 million, primarily due to lower sales volumes.
In Europe net sales increased 141, 4% to $124 $2 million, primarily so I'll, let taco which contributed.
$80 million and net sales.
Partly offset by lower volumes and the negative effect of Apache.
Absolutely to $8 million and foreign currency.
Translation.
Well the construction products represented 85% of our total first quarter sales down from 88% and concrete construction products for 14% of total sales.
From 12%.
Consolidated gross profit increased six 8% to $252 $9 million, primarily due to the 36 million dollar contribution from a taco at a 38, 3% gross margin.
Which resulted in a gross margin of 47, 3% compared to 48% last year.
On a segment basis, our gross margin in North America increased to 56% compared to 49, 7%.
Primarily from lower raw material costs.
Offset by higher factory, and tooling warehouse and freight costs.
As a percentage of net sales.
Our gross margin in Europe increased to 37, 5% from 33, 9% due to lower labor factory and tooling warehouse and freight costs.
As a percentage of net sales offset in part by increased material costs.
Percentage of net sales.
From a product perspective.
Our first quarter gross margin on wood products was 48% compared to 48, 1% in the prior year quarter, partly due to the addition of a telco.
Was 41, 8% for concrete products.
Third to 46, 9% in the prior year quarter.
Now turning to our first quarter costs and operating expenses.
Operating expenses were $133 $1 million, an increase of $26 $6 million or approximately 25%.
Driven primarily by increased costs from a taco as well as by increased personnel costs.
And expansion of our workforce supporting engineering and sales activities.
Operating expenses attributable to a taco include $4 $2 million of amortization expense.
As a percentage of net sales total operating expenses were 24, 9% an increase of approximately 330 basis points compared to 21, 6%.
Our first quarter research and development and engineering expenses increased 38% to $27 million, primarily due to higher personnel costs in pursuit of our future revenue generating opportunities aligned with our strategic growth initiatives as well as higher professional fees and travel and north.
America.
$1 million in R&D, and engineering additional costs or attributed to Taco.
Selling expenses increased 32, 1% to $48 $7 million, primarily due to $8 $4 million.
And Taco as well as increased personnel professional fees and travel related costs in North America.
On a segment basis selling expenses in North America were up 12, 8% and in Europe . They were up 143, 8%, mostly due to Taco.
General and administrative expenses increased 18, 5% to $63 $7 million, primarily due to $11 $5 million from a taco, which includes the aforementioned $4 $2 million and amortization of acquired intangible assets.
As a result, our consolidated income from operations totaled $118 $4 million.
An increase of four 9% from $124 $4 million.
In North America income from operations decreased 15, 7%.
$114 $4 million.
So a combination of lower gross profit and higher operating expenses.
In Europe income from operations was $13 $5 million compared to a loss of $1 $4 million.
Which includes the tacos operating income of $8 $5 million.
Which is net of integration costs of $1 $4 million and the previously discussed.
Profit and operating expenses.
On a consolidated basis, our operating income margin was 22, 1%.
A decrease of approximately 310 basis points from 25, 2%.
Our effective tax rate increased to 25, 1% from 23, 7%.
Accordingly, net income totaled $88 million or $2.05 per fully diluted share, which is inclusive of <unk>.
$6 million of net interest expense.
This compares to $94 $6 million or $2.19 per fully diluted share.
Now turning to our balance sheet and cash flow.
Our balance sheet remained healthy at March 31, 2023, cash and cash equivalents totaled $252 $5 million.
There are $48.2 million from our balance as of December 31, 2022.
Our inventory position at March 31, 2023 was $576 $4 million.
Which was up $19 $6 million compared to our balance at December 31, 2022.
We will continue to focus on effective inventory management to ensure we retain our strong levels of customer service and on time delivery standards in light of the ongoing uncertain economic environment.
During the first quarter, we generated cash flow from operations of approximately $3 $1 million compared to $44 $7 million.
At quarter end, our debt balance was approximately $572.6 million.
Which is net of capitalized financing costs.
And we have 300 million.
Dollars remaining available for borrowing on our primary line of credit.
During the first quarter, we invested approximately $27 million for capital expenditures.
In acquisitions and paid $11.1 million in dividends to our stockholders.
Next I'd like to discuss our 2023 financial outlook.
Based on business trends and conditions as of today April 24th we are updating our guidance for the full year ending December 31, 2023 as follows.
We now expect our operating income margin to be in the range of 19% to 21%.
Key assumptions include continued anticipated softness although to a lesser extent, but our view at year end.
And our top line given the slowing housing starts in the U S. Consistent with what we are seeing in the beginning of Q2 based on sales trends in April cost of goods sold which reflect lower steel costs as compared to our weighted average peak in Q3 2022 as well as to our view at year end.
Increased operating expenses, we believe are needed to continue to position the company to make meaningful share gains in our markets and growth initiatives not associated with U S housing.
At a slightly lower at Taco operating margin profile than the rest of the company.
Including intangible amortization as well as $6 million to $8 million expected total.
Annual integration costs.
Yeah.
Next we continue to expect total annual interest expense on the outstanding $150 million revolving credit facility.
$427 $5 million outstanding term loan to be approximately $9 $7 million.
Including the benefit from interest rate and cross currency swaps mitigating substantially all of the volatility from changes in interest rates.
For 2023 effective tax rate.
Expect it to be in the range of 25% to 26%, including both federal and state income tax rates and assuming no tax law changes are enacted.
Lastly, we expect capital expenditures to be in the range of 90 million to $95 million, including approximately 22 million to $25 million to be utilized.
The previously discussed Columbus, Ohio facility expansion with the balance of that project to be spent in 2024.
In summary.
We were pleased with our quarterly financial performance and continue to believe the future looks bright for Simpson despite ongoing macroeconomic uncertainty.
Looking ahead, we remain focused on continuing to provide a superior level of service and value to our customers and executing against our long term growth strategy. While at the same time, maintaining diligent expense management in today's complex dynamic environment.
We look forward to updating you on our progress in the coming quarters.
With that I'd like to turn the call over to the operator to begin the Q&A session.
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Our first question comes from the line of Tim Weiss with Baird. Please proceed with your question.
Hey, guys scared a good afternoon and nice job.
Hum.
Maybe just to start off on the guidance.
You raised it by about 100 basis points versus the prior guidance and Q1 from a from a margin perspective.
Clearly better than the updated EBIT guide and it sounds like your past kind of the peak pain on.
Margins from a raw material perspective, and I guess the end market is actually you know maybe a little bit better than what you thought three months ago. So I guess my question is really just just you know doing 22% EBIT margins this quarter with a guide of kind of 19% to 21% for the year, what actually kind of gets worse here from a margin perspective.
But as we're looking through the balance of the year, where we would.
A similar trajectory quarter over quarter compared to 2022.
But potentially some additional weakness in.
The back half of the year.
Robert Lee more in the in the fourth quarter.
So as we see.
Slightly better.
Volume outlook compared to where we were a few months ago looking at.
We continued our inputs into cost of sales.
Our our head count hiring plans to to further our strategic initiatives.
What would get us to that range.
Okay.
So again Friday, yeah, sorry, lastly, with with that fourth quarter potentially being a little weaker than Q4 of last year.
Okay. So is it is it a seasonality thing so I think historically, you've really had this kind of.
Q1 has the highest or kind of it kind of peak peak margin quarter for the year.
I mean is there anything specific with Q1.
Well, we certainly.
As we look at our.
Quarter over quarter, I think last last year Q1 was the peak from an operating margin perspective.
But just in general.
<unk> seen.
A little better.
Input cost center.
Thank you our gross margin and <unk>.
Although SG&A as a percent of revenue is higher.
This year, we've got slower.
Integration costs impacting that.
Okay. Okay.
Okay.
And then I guess, maybe just just on the SG&A point I mean.
How do you think about spending I guess, just big picture on SG&A.
Despite kind of a year over year decline in sales I mean, when you kind of treat the SG&A spend very independently from kind of what you're seeing in the macro. So this year is kind of a normal SG&A spend a year, where maybe growth perspective, even though even though the top line's a little pressure is that the best way to frame it.
Yeah, So Tim it's Mike we continue to invest in areas that are linked to revenue generating opportunities.
So for example, we've added people to help US go after the multifamily business.
We've added some of the engineering and sales efforts related to some of the growth initiatives.
We believe all of that combined really helps us continue to go after our three financial ambitions.
Market growth and profitability in the top quartile versus our proxy peer group.
Our operating income and Oh I see.
And given the.
The spend relative to revenue, we would expect it should be.
Compared to last year although.
Offsetting some of that will be the integration costs that we incurred in 2022.
Guy that we've noted.
Yeah, that's that's much less than where we ended up last year.
Okay. Okay, and then maybe just the last one.
Just can you give us some context around maybe what you're seeing from a demand perspective, you know relative to three months ago, and how would you kind of conceptualize or just kind of talk about you know what what revenue growth might decline this year versus maybe what it was before and maybe wrap in kind of kind of how April is trending and it sounds like maybe the quarter ended pretty strongly and it started pretty well.
April .
Yeah. So Tim we continue to hear from our customers and we think this year is going to be matter than what they thought last year, Brian mentioned that in the prepared remarks for sure housing starts are going to be a little bit negative.
There are.
Our next story, so, California as you probably saw from the housing starts are down significantly from a market perspective, we're not down nearly as much as the western housing starts are set up or are the data came out.
If you look at the other parts of our business the east coast and Southern U S relatively good versus prior year, and we think good versus the market.
With my family, we still think is again relatively good in this market and then our OEM business.
We're still feeling pretty good about our versus our.
Growth versus prior year and some of the ambition we have for that particular area.
And then coming out of your way to put kind of a number on it.
Yeah, Tim Tim as you know, we're not releasing our numbers on the market and the markets within our North American segment.
But we view that that will show up in our ability to grow faster than the market is how how do you think you'd be able to keep track of that.
Okay, Okay, well good luck on the rest of the year guys I'll hop back in queue.
Thanks, Tim Thanks Kim.
Yeah.
Our next question comes from the line of her angry with D. A Davidson Chief proceed with your question.
Great. Thanks, and good afternoon, everyone.
Good afternoon.
Yeah.
Hey, good morning, or afternoon, two questions on steel first I think Brian in your prepared remarks, you sort of mentioned that you know part of the increase to the operating margin guidance was a lower anticipated steel cost. So I guess first is that right and then second given the move that we've seen can you maybe just help us.
Think about you know how much more steel prices would need to get up go up before you started to be concerned about the margin outlook.
Out there.
Sure so from the steel perspective, I guess, a slight benefit there.
<unk>.
As we've commented in the past steel as a material as a percent of cost of sales as.
The largest component relative to labor factory and tooling and the other cost of sales so.
Slightly better outlook, there compared to where we were at the.
Beginning of the year.
And then.
From a <unk>.
Pricing perspective, as we've noted in the past, we're typically looking at a significant.
Move upward or downward that we would expect to be sustainable before we would.
May make any pricing changes so right now where we.
We're continuing to monitor the market.
We did buy steel over the last couple of quarters to get us through so we can maintain our very high service level and Oh, yeah, well just.
Continue to monitor.
Steel prices in relation to.
So our business and they'll make it.
Make a judgment at that point on if we need to make any adjustments.
Got it and is it fair to think that I mean, even if we saw.
Fuel prices Tomorrow go up pretty significantly that you.
You you wouldnt necessarily feel that on the gross margin line until now.
Q4, or maybe even 2024 kind of at the earliest.
It certainly does take a while for our current purchases.
To.
To be impacting the cost of sales base.
Based on I think what you're alluding to there.
High inventory that those purchases would.
In fact, the weighted average costs and in also in relation to our consumption.
Of material and production and it does take a.
Multiple quarters for that to be fully reflective.
Got it okay.
And then.
You know one of the earlier questions, you've kind of talked about volume a little bit, but I was hoping you could just talk directionally in terms of where kind of traditional distribution and and build their business trended in the quarter versus kind of the home centers and then you alluded to.
Very wet Q1 in California. It starts in the west being very weak so I guess where else in the portfolio did you see you know a pretty meaningful offset to what I expect.
There are some sizable pressures in that area.
Yeah, So Kurt.
We are instead of looking at the business by channel, we're really trying to hold out by those five end use market segments. We think that tells a better picture.
You know just independent of that we have seen a couple of our channels of service to large production builders, maybe be down a little bit more than our channels that would serve tend to tend to serve smaller and midsized customers.
And if you take a look at those five market segments.
So residential housing starts down you know, 18%, so revenue and volume will be below prior year again mixed signal mixed story, there multifamily good eastern and south Eastern United States. Good our commercial business the market there was down 10%.
Creating some headwinds there we do expect revenue volume to be below prior year, but we do think that will perform as or better than our residential business.
If you look at our national retail business here the market is flat ish.
Timing from prior year prior quarter and a couple of other impacts I was a little bit below where we want to be in the first quarter, but we're seeing good point of sale data so were optimistic that well recover and be above market for the year in that area and then our building technologies. Our fifth segment. That's also fairly highly correlated with.
Residential so it was pretty much the same story there.
Got it okay. Thanks for that Mike and Dan Good luck here in Q2 guys.
Thank you thank you Kurt.
And our next question comes from the line of Daniel Moore with CJS Securities.
Proceed with your question.
Thank you and thanks, Mike Thanks for taking the questions maybe shift gears to Taco you you mentioned the offensive synergies continue to get pushed and yet you know pretty good results a moderate growth in it and it really choppy environment. So you know, what's what's going well there is a cross selling is it share gains at this point.
And just how sustainable is that kind of flat to positive growth outlook, how do we think about Q2 and the remainder of the year.
Yes, so Dan more and more as we start doing the cross selling and all the synergies in combining legal entities.
When you want to focus more on an overall European story.
But that being said just a couple of quick comments from a Taco perspective again, we're continue to be.
Very excited about the business model and we're Super excited about the team and everything they're working on if you look at our first quarter versus first quarter. Prior year. So before we close the deal in April of 2022, they did grow the business or we grew the business this year first quarter.
Taco are mid single digits over prior year.
And if you look at our all Oliver our overall business in Europe , France is actually performing fairly well for us.
And as you know that's one of our biggest and most profitable countries in Europe . So we're again pretty excited about the story of the defense of synergies. We continue to push for offensive synergies are going to get pushed out a little bit for reasons. We discussed the overall slow markets, making us a little bit cautious in how we invest.
We believe we're on track for a business case, albeit maybe extended a little bit.
Okay, that's helpful and shift back to North America, It sounds like pricing was roughly flat.
Was there any impact from the price declines implemented in the quarter or should we expect a little bit more this quarter coming up.
Hey, Dan it's Brian so.
For North America.
Not a significant price.
Price impact primarily due to.
I mean, this year compared to last year.
When pricing is being implemented.
On a go forward basis, I wouldn't expect it to be materially different than what we've previously announced.
Okay, and just one more if I could if I may if I look back over the last few years, you know just talking about seasonality revenue in Q2, typically up double digits versus Q1 sequentially.
Are there any factors you can point to that would cause that seasonality to be meaningfully different this year or should we expect to kind of a typical seasonal uptick.
Should be seasonal one of the interesting things over the last couple of years is the seasonality has been a little bit less of an impact.
Let's take weather out of that so that's sort of love it.
Due to.
The lack of or the lack of skilled labor and like frame wood construction.
The the the volumes that we would normally have seen in Q1 to Q2.
It hasn't necessarily been that traditional seasonality.
Because.
With this.
You know again, the skilled labor going to work win win.
Items that were that go into a new start for example, we're challenged on a supply chain perspective, when they were getting the those items and not necessarily related to Simpson, but could be windows and doors appliances. What have you. They were just builders were continuing to build so at least on that segment of <unk>.
Our <unk> business the seasonality.
It's been a less of an impact over the last couple of quarters now this year with a very wet winter, so far or the wet winter on the west coast.
We should see more of an anomaly or a more of a difference between Q2 and.
Q1.
I'm Gonna say less less so than in the past part of it is.
When we're looking at the total company.
Maybe less seasonal now with the addition of a telco.
Yeah.
Yeah.
Got it that is helpful. Okay.
[noise] back with any follow ups, thanks, and congrats to a nice start to the year.
Thank you.
Yeah.
And our next question comes from the line of Julio Romero with Sidoti <unk> Company. Please proceed with your question.
Thanks, Hey, good afternoon everybody.
Maybe.
To start on a Taco I know you mentioned to Taco sales were up mid single digits year over year, but.
When I look at it on a sequential basis. It seems like the sales pace really did pick up a.
A bit sequentially compared to the prior two quarters can you maybe just speak to that sales pick up sequentially and if anything.
Anything to call out there.
Well Q Q4 to Q1, and we're gonna have.
More or selling days, just due to the holidays in Europe .
In December .
From.
Some of the detail Q Q3.
So today, but as Mike noted, we've got a nice results.
All of the he had talked to a business.
And in general so.
The.
Oh that we've gotten blown out there.
Okay. That's that's fair and I know you said you know you you're thinking about Europe as more of a consolidated kind of entity.
And when I look at the operating margin you posted.
Alright, I really I'm wondering what I should add that a little bit of pricing benefit in.
In Q1 for Taco, Yeah, remember, who know that a big majority of the commercial business from a tacos and an individual quote level.
And so and we're tracking gross margins and pricing pretty closely and.
As a result of some of the cost increase in Europe , we have increased prices and Taco product line, that's helped us a lot.
A little bit quarter over quarter.
Thank you for that that's very helpful and I guess, just thinking about Europe on a consolidated basis. The 10, 8% operating margin you posted is pretty healthy.
Is that just a function of Taco.
Just if you could just speak to the operating margin you posted at all.
Within Europe .
A lot of it yes, but the.
The business.
In Europe .
Connector business see the concrete repair business you showed some good.
Margin trends in Q1 relative to prior.
Prior quarters so.
Part of the.
You know offensive and defensive synergies with Taco to Mikes point, a moment ago to benefit Europe overall, we do see a little bit of that reflective in.
And the then I'll, let Tom go part of the European business.
You know who they are.
The operating margin of it of our European business in 2021 was.
Around 7%.
And so when you look at our numbers for.
Quarter, two there were some acquisition costs in there, but roughly operating margin relatively similar to what a what was a very good first quarter minus acquisition cost.
Last year. So I think that's a sign of if we get a little bit more critical mass in there we can run things a little bit more efficiently and we really haven't had the synergies kick in.
Once again makes us confident in the business case going forward.
Got it that's helpful. And then maybe last one for me I know, it's a very small part of the overall pie, but just on the Asia Pacific If you could maybe touch on that can you give us a quick commentary on on on Asia Pacific and maybe a refresher on some of the initiatives you have going on there.
So what we've got going down there from a sales perspective, it's primarily Australia and New Zealand.
And Oh.
We sell a lot of fasteners down in that market.
<unk> got us our initiatives around.
Additional connector and anchoring business there are additional concrete repair business, but.
We got into the Oh.
Australia via acquisition.
But 18 years ago.
And then slowly added additional countries with things.
Please.
[noise] working on growing that one you know slowly we did.
Make a small intangible.
Patent acquisition down there that benefited.
A portion of the quarter.
From a top line revenue perspective.
Now that being said Asia Pac from our assets.
Also includes.
Production facilities in China sourcing offices and in Asia as well so they they manufacture.
Oh.
Significant amount of the companies.
And crane products mechanical anchor products in our China facility. So when we look at Asia Asia Pac from a sales perspective, Australia, New Zealand from a total operations perspective, we also have some production facilities in sourcing are down.
Down there.
Understood I'll pass it on thank you.
Youre welcome.
And we have reached the end of the question and answer session.
Awesome concludes today's conference and you may disconnect your lines at this time. Thank you.
You for your participation.
Yeah.
Yeah.
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