Q1 2023 EMCOR Group Inc Earnings Call
And as a result, we achieved a solid start to 2023. Additionally, we have experienced an increase in new build heat exchanger orders and pull through cleaning and maintenance within this segments shop services operations.
The Kingdom building services segment revenues of $110 9 million represent a reduction of $26 million from last year's first quarter.
Unfavorable exchange rate movements due to the weakening of the pound Sterling negatively impacted this segment's quarter, one of 2023 revenues by $10 $8 million, excluding the impact of foreign exchange and of course, the UK revenues decreased due to the loss of certain certain facilities maintenance contracts not renewed pursuant to rebid.
<unk> as well as a reduction in project activity within with certain customers period over period.
Please turn to slide eight.
Selling general and administrative expenses of $281 2 million represent nine 7% of first quarter revenues and compared to $252 6 million and nine 7% of revenues in the year ago period.
SG&A for the current year's quarter includes approximately $5 2 million of incremental expenses from businesses acquired inclusive of intangible asset amortization, resulting in an organic increase in SG&A of $23 $3 million with <unk> continued revenue growth. We have added personnel to support our back office and contract.
Administration functions, resulting in increases in salaries and benefits from the corresponding 2022 period.
Additionally, with the increase in both our quarter, one operating income and diluted earnings per share as well as the positive revision in our full year 2023, EPS outlook, which Tony will cover later in this morning's presentation, we have seen a resulting increase in incentive compensation expense to reflect the actual and anticipated improvement in year over.
One year performance.
Reported operating income for the quarter was $154 9 million or five 4% of revenues and favorably compares to approximately $100 million of operating income or three 9% of revenues a year ago consistent with my revenue commentary the current quarters operating income and operating margin performance each represent new.
Quarter, One records for the company.
Specific quarterly operating income performance by segment is as follows our U S. Electrical construction segment earned operating income of $40 5 million, an increase of $25 million from the comparable 2022 period reported operating margin of six 3% significantly improved from last year's quarter, given a more favorable.
<unk> mix as well as the negative impact in 2022 of supply chain disruptions, which resulted in job site sequencing challenges as well as reductions in labor productivity and efficiency.
Although we are still experiencing various degrees of supply chain difficulties the level of impact in the current year has been less severe than that experienced in the early part of 2022. This is due to both improved equipment availability and our subsidiary management teams ability to adapt to this less than optimal operating.
<unk>.
First quarter operating income of our U S. Mechanical construction segment of $86 2 million represents a $27 $8 million increase from last year's quarter and operating margin of 8% represents a substantial increase from the five 9% earned a year ago. In addition to this segment's exceptional project execution a better read.
<unk> mix when compared to the first quarter of 2022 as well as moderate improvements in both supply chain and commodity pricing environments were the primary factors driving this quarter over quarter improvement.
Operating income for U S building services is $37 7 million or five 2% of revenues and compares to $24 2 million or three 8% of revenues in 2020 twos first quarter consistent with this segment's revenue performance. These improvements were driven by their mechanical services division, which saw increases in both gross profit.
And gross margin due to better project execution as well as the favorable impact of negotiated price adjustments, which have been enacted in response to the inflationary pressures we have experience.
Compared to the year ago period, our U S. Industrial services segment operating income of $15 million or four 5% of revenues represents an increase of $1 $8 million with a slight expansion in operating margin better pricing and mix, coupled with more and more normalized demand are the primary reasons for these quarter over quarter improvements.
UK building services operating income of $5 4 million represents a decrease of $5 $2 million, while operating margin of four 9% is reduced from eight 1% of margin a year ago exasperating the impact of reduced quarterly revenues on operating income. This segment experienced a shift in the mix and size of project work.
Which resulted in a decrease in gross profit margin. Additionally, contributing to the unfavorable period over period comparison is the impact in 2020 twos first quarter of a successful project closeout, which enhanced reported operating margin in the prior year period. This segment's operating income was also negatively impacted in the quarter.
By $500000, resulting from unfavorable exchange rate movements, we are now on slide nine.
Additional financial items of significance for the quarter not addressed on the previous slides are as follows gross profit of 436 point.
$1 million is higher than the comparable prior year period by $83 5 million or 23, 7% and gross margin of 15, 1% is up 150 basis points quarter over quarter diluted earnings per common share was $2 30 to as.
As compared to $1 39 in 2020 twos first quarter the increase in quarterly net income combined with a reduction in our weighted average shares outstanding standing has led to a 93.
<unk> improvement year over year, our share repurchases in 2022 have positively impacted our first quarter 2023 diluted earnings per share by 25.
Please turn to slide 10.
Of course balance sheet maintains its strength and liquidity positioning us to fund organic growth pursue strategic M&A opportunities and return capital to shareholders fluctuation of note within our balance sheet when compared to December of 2022 are as follows cash on hand of just over $420 million has decreased by 36.
$6 4 million during the quarter, we utilized $84 6 million of cash to fund our operations deploy $25 4 million for investing activities, including capital expenditures and acquisitions and returned $23 2 million to stockholders through share repurchases and dividends. These uses of cash were partially offset by barge.
<unk> during the period of $100 million under our revolving credit facility, resulting primarily from our organic growth during the period, our working capital balance has increased by nearly $193 million. The slight increase in goodwill was entirely a result of the two asset acquisitions completed by us.
During quarter, one of 2023, while identifiable intangible assets have decreased marginally as the assets recognized in connection with these acquisitions were more than offset by amortization expense during the period.
Total debt has increased by just under $100 million as a result of the additional borrowings under our revolving credit facility previously referenced this increase in debt is the primary reason for the change in our debt to capitalization ratio reflected on the bottom of slide 10, and lastly, our stockholders equity balance has increased by just over $92 million.
As our net income for the period exceeded our share repurchases and dividend payments with my portion of this morning's slide presentation completed I will now return the call back to Tony.
Yeah, Thanks, Mark and I'm going to be on page 11 remaining performance obligations by segment and market.
The robust demand for our services continued the trend we experienced in the final three quarters of 2022 into the first quarter of 2023.
Total company remaining performance obligations or <unk> at the end of the first quarter were almost seven 9 billion.
Up a little over $1 9 billion or 32% over the March 2022 total of $5 95 billion.
All but approximately $169 million over the $1 $9 billion increase was organic.
Additionally, first quarter project bookings were also strong with <unk>, increasing $414 million or five 5% in the first three months of 2023 from year end 2022 with a 10.
1% organic revenue growth.
The continued <unk> growth as a sign of strong underlying demand in our most resilient sectors.
<unk> growth was broad based with each of our domestic reporting segments experiencing double digit <unk> growth in the first quarter versus the first quarter and a year ago period further each of these four business segments saw <unk> increase in the first quarter from year end 2022.
Two.
Our two domestic construction segments experienced strong progress project growth year over year with combined <unk>, increasing just under $1 7 billion or 36% from March 2022.
U S. Mechanical Struction segment, so our <unk> increased by $934 million or 28%.
While the U S. Electrical construction segment saw an increase of $754 million or 58%.
Much of the construction segments Arpaio increase results from continued demand for Hyperscale data centers semiconductor manufacturing and health care facilities.
We are also engaged in the build out of the electric vehicle or EV value chain, which includes the production and development of electric vehicles battery plants, and other manufacturing and industrial facilities driven to support this important new industry. We also are seeing increased.
Man from the onshoring of manufacturing and industrial facilities as well as the expansion of capacities by some of our customers.
Also across this whole EV value chain and across this reassuring and capacity expansion, we're seeing strong demand for our fire life safety services. Our U S building services <unk> levels increased $237 million or 23% from March 2022 and <unk>.
Now stands at $1 $25 billion.
And a lot of that is a small to midsized project and service work like all of 2022. This quarter saw continued project awards and its mechanical services Division, which is focused a lot on our energy efficiency indoor air quality in general retrofit projects as well as repair service work.
Growth at all of the channels, we serve to deliver these projects U S. Industrial services grew RPM slightly year over year due to an increase in demand for our heat exchanger shop services and products moving to the right side of the page we show <unk> broken down by market sector as you can see.
We have expanded sector segmentation to 10 market sectors.
As we stated in our February call and for greater transparency into our current and future work. We split out what was previously reported as commercial <unk> into three sectors.
The first of which is at the bottom is the traditional commercial projects and Thats the Golden Bear and it includes work in office buildings warehouses retail and restaurants and other commercial buildings commercial commercial sector <unk> have increased to $198 million or a little over 12% on a year over year.
Basis.
This aggregated these commercial sectors into otherwise to include network and communication and that is the maroon bar and that includes work that we previously referred to as our telecommunications projects, which are data centers data and fiber projects and network cabling projects. This sector has.
Growing <unk> $516 million or 86% year over year, we now have a group called high Tech projects and it's in the high Tech manufacturing sector as shown by the Green bar in these projects and services are in this semiconductor biotech life sciences pharmaceutical and the EMA.
Value chain year over year high Tech <unk> have increased $481 million or over 100% we.
We believe that these industries in this high tech sector high Tech manufacturing sectors are in for the most part in the initial stages of capacity expansion and development and Thats. What we continue to expect to see growth in it it will be up and down a little bit as these are large projects a lot of times covenant and that will drive growth at <unk>.
We also believe that to date there has been negligible impact of the government legislation that was designed to support these sectors.
It just was passed and we think that legislation will not only increase further demand, but we think it will elongate the duration of that demand.
As I've said before we continue to broaden our fire life safety services across all the sectors that would be the gold the maroon and the green and we continue to drive projects across all sectors looking at other market sectors and year over year, our activity healthcare, our payrolls are up 55.
5% institutional is up 10% and manufacturing and industrial were up 35% and short duration projects, which include much of the HVAC repair service work, it's flat maybe up a percent and partially offsetting this increase was a reduction in transportation and water and wastewater Rps.
And looking at our market sector participation. It is noteworthy to see how balanced our participation is this balance demonstrates one of the stress we have highlighted before which is our ability to provide electrical and mechanical construction retrofit and repair service technical labor and solutions across.
Diverse nonresidential market sectors, and U S and UK geographies, we have decent working hand, and continue to bid new project opportunities across many nonresidential market sectors. Our project mix is good and we are executing well in all phases of project delivery and what is still a very.
Challenging operating environment.
I have mentioned several of these robot sectors before today that drive our growth on the next page on page 12, you'll see a highlight some more depth that explain them to you I am not going to cover that page in detail today, because I think it would be redundant with the commentary I just made explaining our rps and with the enhanced disclosure around commercial.
I think we've met many of the things we talk about on page 12, and with that I will now turn to page 13, and 14, we expect our success to continue in 2023. Despite a market that has uncertainty in it we are going to leave our revenue guidance intact at 12% to $12 5 billion in <unk>.
<unk>, but we are going to increase our earnings per diluted share guidance from what was a range of $8 75 to $9 50.
To $9 25 to $10 and earnings per diluted share.
What we now expect our guidance to be our <unk> remains strong and we continue to see demand in key areas like we talked about commercial retrofit semiconductors health care data centers.
<unk> life Sciences. We also are seeing strong demand as I said before for our fire life safety services across most major end markets the supply chain issues and challenges that we experienced through the last 18 months still exists with long lead times unreliable delivery scheduled for finished systems like switch gear and HVAC.
Equipment. We also expect to continue to see inflationary pressures for labor materials and fuel. However, as we did in most of 2022 and in the first quarter of 2023, we will continue to adapt through better planning estimating and resource allocation, So where do we end up in this guidance range will depend on several facts.
There's some in our control and some op side of our control and I'm going to cover first the ones that we believe that are more in our control and it's not an exhaustive list, but it is the major ones. The first thing we need to do is we need to and continue to increase our use of bim or building information modeling pre fabrication enhanced planning to drive.
GNC improve safety and increase the quality and productivity of our service delivery, we can need to continue to pay attention and enhance our pricing and estimating to mitigate the impact of inflation and supply chain challenges third we need to leverage our reputation as an employer of choice to staff our jobs with the right <unk>.
A skills and classifications to not only enhance our labor productivity, but also our safety and cost fourth we need to train and educate our employees at all levels of the organization to work smarter and lead better fit we need to be vigilant with our commercial service customers and actively monitor their financial condition and payment status with us.
As they remain challenged with occupancy and now refinancing issues and finally, we always look to gain SG&A leverage. However, we always will have areas beyond our control that could affect our performance number one material sourcing and lead times continue to challenge the market and our customers I don't think thats improving in 2023.
Not much anyway number two higher interest rates and economic uncertainty may impact the demand for some of our customers' products and services and then it will impact us I expect this move.
This will move some projects in the planning stage to later periods and those in the decision stage, maybe postpone re phased or re scoped number three disruption caused by uncertain energy markets and supply, especially as the conflict in Ukraine continues and it could potentially intensify OPEC took supply out of the market.
And China is reopening increases demand. However, we expect to continue to generate strong operating cash flow and we will continue to execute our long term and successful capital allocation strategy that balances supporting our organic growth and acquisition, while returning cash to shareholders through dividends and share.
Purchases.
Finally, as always I would like to continue to think the EMCORE team because none of this would be possible without your discipline teamwork and dedication to drive the best possible results for our customers and as a result of serving our customers. So well we continue to produce outstanding results for our shareholders and with that Keith I will take questions.
Alright. Thank you at this time well begin the question and answer session.
A question you May Press Star then one on your Touchtone phone.
Jamie Speaker phone please pickup your handset before pressing the keys because part of your question. Please press Star then two at this time, we will pause momentarily to assemble the roster.
And today's first question comes from Matt <unk> with D. A Davidson.
Hey, Thanks, good morning, Congrats good quarter. Thank you.
Yes, Tony I was just wondering if you could comment on your traditional.
Commercial vertical is just in the context of these kind of heightened concerns around credit tightening. It seems like that would be an area. You may have the most exposure risks, but I'd love to hear sort of how you would pick that apart are their high levels of retrofits and upgrades within that vertical versus new construction anecdotes there would be.
Really thoughtful.
So that's why we did the enhanced disclosure then you can see.
The yellow bars traditional commercial and it's the part that's up leased year over year, and it's essentially flat from year end.
Now part of that as a result, we're starting to burn through that's where you really saw the impact of elongated supply lines because those projects that we do for the most part are meant to be.
Quicker headache, so if you think about <unk> commercial backlog.
Probably less than 1% of what we do today to a percent and a half.
What I would call new out of the ground commercial or high rise residential at one time that was very different.
Bulk of the business thats in that traditional yellow section or even that pink section of topping up paying section has you could take that paying section and spread it across all of our other sectors there.
Short duration projects, but that yellow for the most part is aftermarket.
It's short duration projects I'm.
Im not short duration major retrofit and retrofit it's tenant build out its AD moves and changes, it's where our longer duration energy retrofit projects are.
It's that kind of stuff is the vast preponderance of what we do in commercial now.
And then as you move up right, we talked about the maroon and the Green I mean, the reality is that that's a good breakout right because that's where the growth is coming for us.
And like we said that growth was coming even before the enhanced legislation I would like to <unk> and <unk>, we expect that to even continue more and I talked about it maybe growth or <unk>, but we are careful in that commercial sector. We've been careful in that commercial sector for a long time, our especially careful when its developer led.
We pay attention to a lot of collections and we pay attention to their financing.
I think new grille commercial as a growth market right now no.
Do I think theres opportunities with well capitalized customers. The answer is yes, do I think the energy efficiency market has legs for a while ago and I like the way, we service that energy efficiency market and the short duration project market.
We service that through a lot of different channels, we go direct to the owner.
We go to the owners would be called their in house General contractor a construction manager that may run all their projects like in a university or a manufacturing setting, but where the contractor of choice and have been there for a while we go through the large real estate providers.
And facilities managers, we go through that channel. We go through utilities that have programs, where they directly or the helps fund indirect and they have the salespeople that worked with us and sell the project and then we go through the major S goes where they may sell project and now they actually have people actually have to go figure out how to get it done.
And we have the sales force that knows how to sell to them and every one of those channels.
And so we like that position, we think that market has legs. So it's a complex answer but thats why we did the enhanced disclosure because we were thinking we were starting to make.
Make it harder for us to help people understand where the real growth and with that quote.
Commercial sector the way, we traditionally defined it was.
Okay. I appreciate that just I guess staying on the topic of the RPM Tony that the healthcare piece also really sticks out to me just continued expansion. There I guess my question is would you consider that.
A fairly diverse group of customers and a broader trend or this aligned with specific customers that just happened by spending.
It's both it's both brand it's both right on <unk>.
Specific customers drive that backlog because it can be large projects, but if you look over a two or three year period.
Over time and with the way, we think about it as part of a broader trend that got quite frankly disrupted a little bit with COVID-19 because they weren't building new facilities in the middle of Covid. They were built in emergency facilities, but not new facilities or retrofitting. So you could do multi use. So some of this is pent up demand on what should have been capital planning, but it's a long term trend hospital.
And big health care facilities and outpatient facilities.
I need to be cleaner, they need to have better ventilation they need to have the ability to flex from positive pressure to negative pressure in our world. They have much more complex low voltage needs. They have much more complex general electrical needs. They have to put backup power and while theyre doing all that they have to think about their sustainability goals and how they're going to operate that.
Facility more efficiently.
Okay. Thanks.
Thanks, Tony and the last one just.
I guess, which of the two construction business groups are you seeing still sort of more profound challenges.
Related to supply disruptions inflation is it more electrical or mechanical.
It looks like the electrical margin definitely snap back big from last year, but maybe a little below levels. We've seen in the past I'd just love to kind of.
I understand I think.
<unk>.
I would say probably electrical more than mechanical.
It's a more consolidated market for major end products.
And.
It's more on the critical path. So we've had to rejigger, our means and methods to work around that mechanically.
We buy a lot of equipment, we do a lot of HVAC work, but we also do a lot of just straight piping work supporting big process plants.
Or where the owner bought the equipment and and so they do that in the electrical business too for major here, but my experience has been when you look at things like generators and switch gears.
And smart panels.
Livery performance.
Not great yet the mechanical has gotten a little better lease what they say, they're going to do they do but the electrical lead times haven't really moved much at all of the Mechanicals or started to move down a little bit and I think in general the mechanical sales forces are more in tune with their factories.
And I think they have better visibility to keep us up to date on what's happening then the electrical <unk>.
Sales force.
That's really helpful. Thanks, that's what I meant.
Yes, yes.
Okay. Thanks, guys.
Thank you and the next question comes from Adam Thalheimer with Thompson Davis.
Hey, good morning, guys great quarter. Thanks, Adam.
On the industrial.
Business that was your best quarterly op income in three years, just curious what your visibility.
And like there and what the.
If you can build on the Q1 results.
Look we think things have gotten better we like where our shop backlog that we like what that portends for the future. We think we're in a more normalized operating environment, which is good.
We expect to continue to operate normally.
We have no reason to believe we don't have a normal fall turnaround season coming up.
The long haul and <unk> is a new product, we have right or a new service, which is building these alternative energy.
Renewables, especially around solar and Thats clogged up everywhere, but mark I mean, Adam the only thing I would add is don't lose sight of the fact that the seasonality of that business. So it's kind of bookends quarter, one and quarter four.
But having said that we.
We saw as Tony mentioned, a couple of times during his prepared remarks.
We saw as close to a normal operating environment as we've seen in a while with that customer base.
And.
It's a lot of it is mix driven as well so we're deploying but the qualified labor we have and if our customers adhere to their to the schedules that we've been planning with them.
We're optimistic that the 2023 is kind of what we used to look like.
Our normal 12 months.
Performance period for the industrial services segment, and Thats reflected in our guidance and part of Thats reflected in our guidance to income.
Okay.
What is the.
What is the outlook for solar panels.
Don't know that follow at that time.
Certainly people way better qualified to talk about that to us as part of our business.
But what based on what we see not good.
It's still clogged up.
<unk>.
I don't think theres going to be this big uptick this year, but again that's sort of.
There's people that know a lot more about that to me is someone someone that.
Followed it closely through our bidding work, we see a lot of delayed work.
And then I.
I guess, Greg kind of touched on this but I just wanted to touch on your macro comment and then I guess the debate is.
Where do you think macro would manifest itself because it seems like a lot of these big projects are kind of locked and loaded and there is government support.
So maybe those big projects go, but there is risk to the short duration projects.
Yes.
I think there is.
Sure.
It's hard to tell I mean, the short duration projects have something thats been driving them for a while and so theirs is counterbalancing view out there in my mind because of energy prices.
And people to drive for more sustainable facilities. So on one hand, you sit there and say why just won't do the project on the other hand, you say everyday I don't do that project my cost structure becomes worse because of energy prices continue to become uncertain and escalate.
And most of our major customers are committed to sustainability goals.
And you can't get there unless you do equipment replacement and modernization and all of that something as simple as fixing the compressor lines at our manufacturing facility and that requires a lot of work it requires new equipment.
It could take out something that used to be six to eight kw per ton and now youre, putting in something with <unk> three.
<unk> kw per ton on a chiller and it has variable speed.
Market change in your operating cost profile, and then youre going to start thinking about okay. I have to do that if I don't do that and these triple net leases, which has always been the vein to the existence of energy efficiency. My building may no longer be competitive right. So I have all of these forces going on around me.
So I think that if you are heavily exposed to newbuild commercial you probably have a different outlook than we have on that I. Also think if you think of some of these major projects that are going on on those big things I've talked about from re shoring EV value chain.
Semiconductors data centers I remember, there's a whole ecosystem around each of those.
I guess most of this was happening without government support that can only help it now and it can only elongated in my mind and most of these customers are not worried about five.
500 basis point expansion in interest rate cost one they are self funded for the most part and the kind of value they're going to create over what they're doing and then you layer on top of that for some of these industries the demand with respect to national security and the onshoring of some critical industries I think that mix driving long term demand.
<unk> in a favorable way and look for US we have greater Ipos, we expect to continue to have great <unk>.
From this high level that could plus or minus a little bit quarter to quarter, but we expect our overall trends over the next couple of years to be pretty good as on in these in these major sectors.
But we'll see.
Alright, okay. Good color thanks, guys.
Thank you and the next question comes from Sean Eastman with Keybanc.
Hi, Jami great great start here.
Good start.
I mean, I thought the big takeaway from the first quarter. It was really the margins I mean I think this is a record.
Margin performance for our first quarter, you guys are saying theres still kind of lingering supply chain challenges.
Is there something unsustainable that came through in the first quarter.
Or.
We just kind of effectively not updating the outlook sort of just flowing through.
A better start to the year.
I don't know Shaun I think taking our outlook up to 925 to $10 from 875% to 950, <unk> pretty big move.
I think the revenue velocities in the businesses and we said that in our initial guidance and I think further if you extrapolate that.
Think that.
What we're really saying in the guidance as we expect strong margins through the year.
Now we are we are mixed dependent and projects start they finish.
But we there was nothing extraordinary in the first quarter right Mark Sean the only thing I point out.
If you recollect from quarter, one last year.
We did have some additional headwinds with regards to project write downs, both on electrical and mechanical construction.
The extent of write down activity in the first quarter of 2023 was not at that same level.
The other thing, which is extremely difficult to quantify relative to 2023. This quarter. One is with the fairly mild weather winter weather pattern. We had in most of the geographies. We operate we didn't deal with the same level of job site difficulties with regards to fighting weather, but like I said, it's difficult to quantify.
<unk> it does not have an outsized impact on the quarter performance and the only thing I might've done is pull pulled some activity forward in the year and I think the other thing that bolstered first quarter operating margins operating income margins. As this is a seasonally strong quarter for industrial and so we have to factor in with <unk>.
And third quarter mean to us there, especially if we can't deliver some of the solar work that we hope to deliver towards the back half of the year. So and then I guess just general caution right I mean, I talked about the things we don't control.
And those are sizable macro forces, we don't control and so we think it's prudent to have an eye towards that but I think we have a strong guidance out there to updated we started the aero strong guidance, we updated that with strong guidance and underlying that is what we believe depending on where you are that revenue range is pretty strong.
Our underlying operating performance.
Yes look I don't want to take the wind out of the sales great Great update I guess, what I was getting at is just that I have to go back to <unk>.
2014 to find a year, where the first quarter.
Is not the low watermark operating margin for the year and.
I feel like with that dynamic in mind.
Seems like Theres, a lot of cushion in the guidance from a margin perspective over the balance of the year.
Yeah, I mean, we had a lot of.
Okay.
We start looking at this at the macro level, though right. There's a lot of puts and takes in any given quarter.
We think that with those countervailing macro forces.
And how that could impact the back half of the year, we think that.
We put strong guidance out and we think we will obviously end up somewhere in that range and we got to execute well on the things that we can to keep those margins, where they are and I went on a.
The new rate is four or five points that we think are most important.
And just coming back to the credit tightening element being so topical maybe.
That from a different way, how do you see that potentially.
Impacting your M&A pipeline.
I don't think it impacts our ability to do what we think we need to execute other things we would like to execute I think though Shaun.
We know this right.
The overall M&A environment not favorable.
Less things may be for sale right now a lot of the things we buy are necessarily in that typical M&A market.
Most of the deals we've done over the last three years have been people selling their life's work, which is where we operate the best right that's where we are.
The most successful and we also drive the most value not only for the person selling the business because they have a lot of things, we're looking at but for our shareholders and it gives us new opportunities to grow.
Sure.
Private equity is not much in the market right now.
Interest rates covenants and credit tightening and the ability to place their secondary debt.
They're not in the market people that want a robust auction around the process. Therefore are trying to sell their companies right now.
And so put all that together.
It's no secret I mean, you've followed the same things we do.
M&A volumes are down significantly that being said for the kinds of things we do.
I don't think I would say Oh my God, it's the most robust pipeline I've ever seen but what we have was I think is an acceptable pipeline of opportunities for us to pursue to continue to build out our footprint add to our capability and enhance the services we're offering.
A number of geographies or new geographies or product lines would like to add a product services would like that.
Got it got it alright, thanks for the perspective.
Compliments to the team. Thank you.
Thank you and this concludes our question and answer session I would like to return the call to Tony <unk> for any closing comments.
Thank you very much all.
The startup we started well in 2023, we've got a lot of work ahead of us and I Hope you all are well have a good summer and be safe.
Thank you.
France has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Okay.
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