AAON Inc. Q1 2023 Earnings Call
Welcome to the a M Inc. First quarter 2023 earnings conference call.
Our host for today's call is Joe Mondello director of investors relations.
At this time, all participants will be in a listen only mode.
Later, we will conduct a question and answer session.
I would now like to turn the call over to your host Mr. Mondello, you may begin sir.
Thank you operator, and good afternoon, everyone. A press release announcing our first quarter financial results was issued after market close today and can be found on our website a a O N dot com. The call today is accompanied with a presentation that you can also find on our website as well.
On the listen only webcast. Please go to slide two of the presentation. We begin with our customary forward looking statement policy during the call any statements presented dealing with information that is not historical is considered forward looking and made pursuant to the safe Harbor provisions of the Securities Litigation Reform Act of 19.
And 95, the Securities Act of 1933, and the Securities and Exchange Act of 1930 for each of the amended as such it is subject to the occurrence of many events outside <unk> control that could cause results to differ materially from those anticipated.
We're also aware of the inherent difficulties risks and uncertainties in making predictive statements. Our press release and Form 10-Q that we filed this afternoon detail some of the important risk factors that may cause our actual results to differ from those in our predictions.
Please note that we do not have the duty to update our forward looking statements. Joining me on today's call is Rebecca Thompson, CFO , and treasurer, and Gary fields, President and CEO , Gary will provide some opening remarks, Rebecca will then walk through the quarterly results and will then finish with Gary for some commentary on the <unk>.
Quarter end outlook with that I will turn the call over to Gary.
Good afternoon.
We're all we're very pleased with our first quarter results, we reported record sales for a fifth straight quarter organic volume was up year over year 23, 5%.
That was against a quarter a year ago, where organic volume was up 21, 3%.
Our operations team is doing a great job managing the robust demand by increasing production capacity quickly while maintaining solid productivity.
Backlog continued to grow.
The quarter marked the seventh straight quarter of record backlog and our ninth straight quarter that backlog grew sequentially.
Despite how successful we've been with adding production capacity bookings continue to outpace production.
The environment for us remains positive.
Bookings trends are still on the rise and our channel partners are very optimistic.
Thus, we maintain a positive outlook for the year.
I'll now hand over the call to Rebecca to go over the financial results.
Yeah.
Thank you Gary.
I'd like to begin by discussing the comparative results for the three months ended March 31, 2023 versus March 31, 2022, Please turn to slide four.
Net sales increased 45, 5% to 266 million from $182 8 million the largest driving factor to the growth with organic volume, which contributed 23, 5% buying.
Buying growth reflected the company's strong backlog at the start of the quarter as well as a fourth straight quarter of record production, which reflects the company's success, that's attracting and retaining employees along with continuously adapting to parts shortages and.
In addition to volume pricing contributed 22%.
Moving to slide five.
Profit increased 67, 5% to $77 2 million from $46 1 million.
As a percentage of sales gross profit was 29% compared to 25, 2% in the first quarter of 2020 to.
The increase in gross profit was primarily due to realization of price increases counteracting, the increasing cost of materials and labor.
Within the quarter, we incurred some one time expenses related to the improvement of employee benefits.
This explains the majority of the contraction in gross profit margin compared to the fourth quarter of 2022.
Please turn to slide six.
Selling general and administrative expenses increased 42, 9% to $32 9 million from $23 1 million in the first quarter of 2022.
As a percentage of sales SG&A decreased to 12, 4% from 12, 6% in the first quarter of 2022.
The increase in dollars is primarily attributable to salaries and benefits and profit sharing which have increased as a result of our growing head count employee pay increases and benefit improvements discussed above.
Please turn to slide seven.
Income from operations increased 92, 1% to $44 2 million from 23 million in the year ago quarter as a percent of sales operating margin expanded to 16, 6% from 12, 6% in the first quarter of 2022.
Moving to slide eight diluted earnings per share increased to 103% to 67 cents per share from 33 per share.
In the quarter, we benefited from a large excess tax benefit of $3 8 million associated with depreciation of Aon stock excluding.
Excluding discrete events, we continue to anticipate a tax rate of 24, 3% through the rest of the year.
Turning to slide nine.
Our balance sheet remains strong.
Unrestricted cash totaled $2 5 million on March 31, 2023 and debt at the end of the quarter totaled $83 7 million within the quarter, we borrowed $12 7 million on our line of credit.
Our leverage ratio a 0.47 was essentially in line with what it was a year ago and at the end of the prior quarter.
The increase in debt was primarily related to investments in working capital we had a working capital balance of $246 3 million at March 31, 2023 versus $203 5 million at December 31, 2022, and $169 5 million at March 31 2020.
To.
The investment in working capital was made to help facilitate the robust volume growth. While also helping mitigate supply chain issues, we anticipate working capital will become a source of cash in the second half of the year.
Along with improved earnings cash flow from operations will improve significantly throughout the year, helping pay down debt and financed capex projects.
Capital expenditures for the first three months of the year for $28 9 million up 106, 2% from a year ago.
We continue to expect capital expenditures for the year to be approximately 135 million, which equates to more than 150% year over year growth.
We monitor our growth trajectory and capacity utilization regularly and we'll continue to invest in long term growth.
With that I'll now turn the call back over to Gary.
Please turn to slide 10.
As I said in my opening remarks, we're very pleased with the first quarter.
Our operations continued to perform well in Q1 and I continue to command the team for their performance.
Every quarter in the recent past the company is pushing more volume through our three plants than we've ever seen before.
Our organic volume growth was up 23, 5% and on a two year stack it was up 44.8%.
We've made great strides in increasing our production capacity to allow for this growth.
Total head count was up 27, 3% from a year ago and up 10, 4% from the end of 2022.
We continue to do a great job of Onboarding, new employees more importantly, we are efficiently integrating them into our operation so as not to disrupt productivity and profitability.
We are also investing in new equipment sheet metal production is running at high utilization rates.
We're investing in new solvent <unk> machines, both to replace old machines that will enable us to increase productivity as well as to add incremental sheet metal production.
Supply chain issues continue to be a challenge they seem to be slowly improving.
But they still very much exist.
This continues to weigh on productivity and output without them volumes, most likely would be stronger productivity certainly would be better.
That said our productivity associated with dealing with these issues continues to improve.
Lastly, volume growth was also a reflection of our premier sales channel and the backlog our rep partners have been able to generate for us.
Has never been more aligned with its sales channel partners and has never supported them as much as we are now.
Last month, we had the Grand opening of our exploration center located at our headquarters in Tulsa.
This is the latest example of how we are supporting our partners.
This is the first of its kind in the industry.
The building is at 27000 square foot showroom that showcases our equipment side by side other market alternatives.
Nowhere to this scale can customers go to see and compare Aegon product next to market alternatives.
Sales reps will use this to help customers better understand the value proposition that a on equipment provides.
Our sales channel has never been as strong it is right now and.
And we're giving them more tools to help them to be even more successful.
Now please turn to slide 11.
I wanted to discuss our gross margin performance and outlook.
The 29% we posted in the quarter was in line with our internal expectations as.
As we stated on our fourth quarter call and as Rebecca stated today. There were some one time expenses that weighed on the margin.
We anticipated the force for the first quarter to be a low watermark and continue to expect improvement throughout the year.
In addition to certain expenses in the first quarter not recurring we have more price coming.
Meanwhile, input cost inflation is moderating productivity is also expected to improve throughout the year.
Most head count additions will occur in the first half of the year.
Is that new head count is integrated trained and fully up to speed, we expect productivity will improve which we expect will occur in the second half of the year.
All in all we maintain the view that 2023 gross margin will be better than the fourth quarter of 2022.
Now moving to slide 12.
Overall demand remains very strong.
Bookings in the first quarter were the strongest of any quarter since the first quarter of last year and if not for a large price increase we had on March 30th of last year, which resulted in a big pull forward of orders. This past quarter would have likely been a company record.
Despite the robust growth in volumes and significant increase in production capacity bookings continued to outpace sales.
Total backlog was up 30% from a year ago and up nine 5% from the end of the fourth quarter.
Many factors.
Contributing to the robust demand, including favorable lead times are narrowing price premium between our equipment market alternatives the attractive value proposition that aon equipment has to offer the strengthening of our sales channel robust growth at basics and favorable secular market trends related to <unk>.
Carbonization electrification energy efficiency and new governmental regulations.
Please turn to slide 13.
Our lead times have continued to extend we still maintain industry best lead times, but the gap has begun to narrow.
We're doing our best at reversing this with the investments we're making in production capacity.
Capex is expected to be up 150% this year of which a vast majority is related to increasing production and we're increasing head count.
Considering that I'm optimistic that lead times have peaked.
Please turn to slide 14.
Demand continues to be fairly broad based as far as end markets data centers and semiconductor markets are very strong.
Basics had a very good quarter as far as bookings.
K 12 education vertical is solid health care and manufacturing are also still very good with.
We continue to see robust demand in the grow facility market.
And while new construction of warehouses slowing the end market remains good for us due to retrofit work.
Overall demand for us is solid across most of the board sentiment among our channel partners remains positive compared to a year ago. It may not be quite as strong, but overall sentiment is still very positive.
Macro data is also.
Still solid construction spending is now well beyond pre pandemic levels and construction starts are at the strongest levels in years.
A b I and the Dodge momentum index, which tracks the pipeline of nonresidential projects early in the planning stages.
I've recently peaked but they still imply the pipeline is still at historically high levels.
Please move to slide 15.
Parts sales grew 38, 5% in the quarter and on a two year stack they were up 88, 6%.
The business declined to five 3% of total sales, but that was due to the robust growth of equipment sales.
We remain optimistic through the rest of the year despite.
Despite the positive outlook parts continue to feel effects from the supply chain issues.
As those issues dissipate, we expect parts sales accelerate.
Long term, we continue to anticipate this business will become a larger part of the company both on a sales and profitability basis.
Now please turn to slide 16.
Before finishing up and handing off the call for Q&A I want to provide some information on our outlook for the rest of the year.
Based on the size and improving margin profile of the backlog, increasing production capacity and productivity and strong order trends, we anticipate sales and earnings will improve sequentially through at least Q3.
We continue to anticipate pricing will be a low double digit contributor to sales growth for the year for.
For gross profit margin, we anticipate gross margin will improve throughout the year.
For SG&A, we're making several investments that will help position the company better for long term growth.
This will limit the operating leverage you usually tend to see with SG&A.
We continue to think SG&A as a percent of sales will be slightly higher than what we realized in 2022.
Finally, capex will be approximately 135 million.
In closing I want to finish by thanking all of our employees our sales channel partners and our customers also want to remind everyone. We will be hosting an investor day on may 17th and 18th at our headquarters in Tulsa, you can find more details on this event in the invest faster relations section of our website.
We will also be attending wells Fargo's Industrials conference on June 13th I Hope to see some of you at these events. Thank you and I will now open up the call for question and answers.
If you would like to ask a question. Please press star one on your telephone keypad now.
You'll be placed into the queue in the order received.
Please be prepared to ask your question when prompted.
Once again, if you have a question. Please press star one on your phone now.
And our first question.
Comes from.
Bret Solomon of D. A davidson.
Hey, Thanks, good afternoon, Dave.
Yep.
Hey, Gary.
Hey, I, just I mean, it looks like still robust orders and backlog.
I didn't see a breakdown of.
Cory on product for basics, maybe if you could just talk to what youre seeing in terms of underlying demand on both sides. There in either business line, Gary and then also you know what.
What what are you just sort of the strongest end market drivers for the company today. Considering this is huge book of business you are building.
Well the pace at basics is a little more brisk than the pace at legacy.
But there's good strong bookings at both.
When I look back historically going.
Going back say five quarters.
If I take out the effect of a price increase having pull forward.
Then book.
Bookings overall were at the highest level related to a bill that they had been in all of those quarters.
In legacy stayed just about pace with that we're still not.
Able to produce as much as we're able to book. So the backlog continues to just accumulate a little bit at a time I will say that it's coming more in parity for two reasons.
Well one particular reason is the increase in output volume I mean that that's really the key thing that the bookings have not really been over anything.
Tying it all so where we're just continuing to increase production.
<unk> got more things in place now our head count is up it continues to accumulate.
And where we're.
Layering in people at the same pace that we're able to get more parts. So as there's been a lot of talk in a lot of business publications recently about the supply chain issues easing if not you know being a non issue.
I don't want to call them, a non issue I'll, just say that the big sticking points are behind US now we just fight with some kind of small things from time to time, but they are still a bit disruptive.
Okay.
Gary one other question.
Hey, Scott.
Sales nicely into the next one.
One of the questions we seem to get it.
When eventually industry lead times normalized whenever that is.
Sustain.
And market share gains you've ultimately theme I'd just love to get your response perspective on that.
Yeah.
We've had sales meetings, we had in eastern half of the United States United States sales meeting in March we had a western half about last week or week before excuse me.
So we had all the sales channel partners together in between those two sales meetings, we had meetings with the principles introducing them to the Grand opening of the new marketing Center.
All of them assure us that while we did gain some business because of lead time that those customers now appreciate the value even more since they've got this equipment on their buildings and being able to sustain those customers long term is very probable.
No I don't think that as lead times come together that it's going to be.
As impactful.
It wont be impactful in a negative way but.
We did gain because Lee chime lead time initially now the next thing is is that with the.
The regulations that took.
Effect January one 2023.
All of our competitors have.
Had to raise the energy efficiency of their equipment considerably to get over that threshold Aon had been over that threshold for a long time and had been priced according to that.
In order to meet these 20 twenty-three Reg.
Regulations, there's more cost content in the units to do it so a lot of the price premium had been associated with the difference in energy efficiency and now they're much closer to us. So that's narrowed the price premium. So then the other value.
Items that are <unk>.
To the Aon equipment become more visible standalone on themselves. So there there's fewer things that you have to evaluate theres less premium difference and so for all these reasons I think that our trajectory is sustainable.
That's great.
Just the last one understanding the investment.
The facilities people, you've had to make to support the growth and future growth for that matter.
But as you move into 2024, do you anticipate being sort of improved SG&A leverage from what you're talking about doing this year.
Yeah. It is.
Probable that we will get some leverage on that.
But with the growth trajectory. We're on we're gonna have to stay very aggressive Oh Capex Oh.
You know what what we're putting in place this year solves a lot of problems, but if we continue to grow at this rate.
For the reason that it takes about three years to plan and then get into production a new facility, we'll have to continue to invest there.
So.
Some of that hits SG&A and some of the planning processes and so forth, but you know the other thing to bear in mind is that.
We use.
Utilize our profit sharing plan for our employees everyone below the senior leadership team level is eligible for profit sharing and that's 10% of our pre tax profits so as.
We become more profitable there's more attributed to SG&A because of that one event right. There. So we will get some leverage eventually, but I don't look for it to be significant or right away.
Understood. Okay. Thank you for taking the questions don't pass an arc.
Yeah.
Our next question comes from Jon Braatz from Oppenheimer.
Your line is open good afternoon, everyone.
Good afternoon, Jon Erik can you talk a little bit about your pricing.
Pricing for the remainder of the year I think you've been increasing prices, 1% per month, Oh, what do you see for the remainder of the year.
We increased prices, 1% per month through April mhm. When my first occurred we did not we we hit the pause button.
R. F. P. N. A team has done a real good job of projecting where our financial performance will be and they've gone back and calibrated that against actuals. So that we know that their algorithms are.
Very accurate or you know.
As accurate as possible in our projection.
<unk>.
And with that we're certain that we have achieved the financial performance that we've always.
Set as our goals are.
And.
With price increases that are in place now we believe that the gross margin will continue to increase quarter over quarter throughout the year so that.
When we end the year it'll it'll ended the highest gross margin as a total year that we've we've had.
We also believe that.
The total year will end up.
Getting parity or slightly north of what it was in Q4 of 22 okay.
What are you seeing on the competitive front in terms of pricing.
Or are your competitors continuing to raise pricing.
It's only seen one recently that they announced another price increase haven't.
I haven't seen anything else.
But.
People put price increases in late in the fall or earlier in first quarter.
Coming into effect about now but those were.
More or less in line with.
The accumulation of our 1% price increases per month, Okay. Okay, and then lastly in the quarter revenues from basics was about $30 million.
And I think that was down from 39 9 million.
In the fourth in the fourth quarter is that just a reflection of seasonality or is there anything else.
No that was that was supply chain. It it was a timing issue because everything that we revenue from their Amazon a whip schedule.
And we we had equipment that we couldn't quite finished because we had a little bits and pieces that had not arrived in time. So it's a little bit of a kind of a stair stepping process, you've got a big unit that's.
Waiting on a few parts in order to get to that complete stage I look for their revenue to be increasing throughout the year.
Okay. So and you don't is there anything you can say about their backlog versus last year.
I don't have the exact percentages in front of me, but it's tremendous increase the opportunities just keep coming our way and they keep landed these things.
There's a lot of their backlog has requirements for shipping out in the future a bit not in accordance with standard lead time, but but longer than that because people want to secure that position because they're critical path to their project being completed on time, So I think that.
Everything we dreamed about when we bought basics as far as how it would occur with.
Our balance sheet coupled with their.
Appreciation in the marketplace.
Those have all come to fruition and it's just it's probably one of the most outstanding AR.
Actions that I've ever been involved in.
Okay, Alright, that's good thank you much.
Yep.
Okay.
Our next question comes from Chris Moore from CJS Securities Your.
Your line is open.
Hey, good afternoon, guys. Thanks for taking a couple of questions certainly.
So maybe you know the 135 million in Capex I think roughly $100 million of that is for capacity expansion can you just kind of help with the math in terms of you know the additional capacity on a on a relative basis that that this investment will make.
We will provide.
Yeah.
So look we'll dissect it by the four different facilities.
So we'll start with the smallest facility Parkville, Missouri, where we manufacture electronics that are control items for our.
Our unitary equipment predominantly.
Oh the expansion there will more.
More than double their output capabilities.
When we move to the.
The next location Redmen, Oregon basics were.
We're building some things that well they had doubled the facility right before we purchased them and in fact as wasn't quite finished.
When we got him.
They found a way to improve productivity a lot by building a call it a little bit of an annex building to move one of their processes that was taking up some space that would be better utilized if they were in their own.
Annex facility, so that has the ability to probably raised there.
<unk> <unk>.
Production above what they already had another.
Double digit percentage, but I'd say, you know low to middle maybe 20, 25%.
In long view.
Two years ago, we put a new building in place and you've seen the revenue of the coil products.
<unk> products and Longview, you've seen it go up substantially.
Had.
In our mind and are planning a five to seven year runway before we would have to build the mirror image half of the building as you recall, we built three permanent Walsh and one temporary well.
Well with basics.
Acquisition, and being able to move one of their significant datacenter products down there for a manufacturer, which we've started doing.
That used up a lot of our surplus and so that building actually what was it wasn't out of capacity.
Ceiling, but it was coming much quicker than we wanted so we're starting to build the other half of that building that will give us, let's say right now that building is probably capable of somewhere around $150 million to $180 million in finished products a year something.
In that range, it'll it'll more than double that.
Oh, Yeah, and Tulsa kind of an interesting conundrum here.
So when I first came to the company I would walk the plant floor and I'd see all this space. It just wasn't being utilized well and so I took that to a team of people and they they named themselves space force and they've done a tremendous job of Repurposing that space. They've gained is probably in excess of 30 may be even as close to 40% more usable space.
But then we ran into another problem. When we brought all these people on to use that space, we didn't have any parking places.
We bought some land joining one of the building. So we have more parking it's funny how some of these little things just manifest themselves like Oh, Oh I didn't think about that so now we have we've closed on that property. So we have plenty of parking spaces are the other thing was that when we're onboarding.
<unk>.
Employees didn't we were fairly constrained on the space, we had to do that and you can see we're growing you know employees quite well.
Aggressively.
And so we needed more space to do that.
We thought the employee experience would be enhanced if we had a a discreet location for HR. So if they had anything they wanted to discuss with HR. They werent standing in front of you know maybe their supervisors or their peers and you now have to answer that question why did you go to HR today.
No.
One of the buildings, we closed on is about maybe a city block and a half close to two city blocks away from the main campus and will be relocating HR over there.
Both for improved onboarding processes and for.
The discrete nature of it the other thing that we got with that property was a large building that at one time. When we initially started pursuing the property we envisioned it as potential additional warehouse facility to it.
Our inventories increased so much we we needed warehouse well, we did a reevaluation.
The use of that building here recently, and we've decided that we're going to.
Add a coil manufacturing facility in that that building, we just acquired to supplement the long view.
Cool manufacturing that'll do two or three things for US number one is it'll minimize the freight damage that happens when you move in coils, two or three times handling them and moving them 300 miles is as opposed to a couple of blocks. The other thing it'll do.
Is it'll give us the ability for a.
Quick response, when we have a change order and then it just gives us a lot more coil manufacturing capacity. So we're we're just barely stay on pace with core manufacturing and the demand of the <unk>.
Telcel facility and how fast it's growing so like I say, we just kind of repurposed our thoughts on that and I don't know exactly.
We just started putting the plan together a few days ago and they're going to present me a written plan tomorrow on exactly what the pace of construction of that'll be as far as getting the equipment in there and getting it up to go but those are kind of the major things. We're doing we we currently have.
Probably.
I'll just say in summary, we probably got 40% surplus capacity in the facilities as a whole.
But if the growth rate, we're going out that's not very long.
So we're just trying to stay out in front of this thing.
And and make sure that we've always got surplus in front of US you know I suffered through that period of time back there in 2017 2018, when we didn't have enough production capacity and that's just not a spot I wanted to see us and again.
Got it so is that back of the envelope is that are we talking about an additional $400 million to $500 million in and capacity from from this investment yes.
Yes, Okay and back of the envelope, that's that's probably a good number to use yes sir.
Got it.
And in just the last one for me you talked a lot about bookings but.
No. They continue to outpace production can you maybe just give a little sense of the degree to how much you're still outpacing production compared to recent quarters.
Yeah. So.
As I kind of touched on a little bit early on when we look at the whole business, including basics, which is now fully integrated into the thought process of the whole company.
We had a huge price increase went into effect, our first quarter of 'twenty two caused a lot of pull forward, but if I normalize that then I would say that bookings versus billings are really close to the highest level they've ever been in Q1 of 'twenty three.
They just continued to increase quarter over quarter throughout the year. So we've we were gaining momentum while.
You hear all these signs of things slowing down there's nothing slowing down for us but at the same time, we've gained our production capacity. So you're seeing a great thing here an opportunity for us to grow at a very robust rate I do believe that that'll begin to bend over a little bit for two reasons I think the market will slow down just a little bit.
Overall, I think our chances at continuing to book at a brisk right are very very high but our production continues to increase we had planning procedures to add considerable people. The first half of the year, which would allow us to continue to accelerate.
If seasonality happens to reemerge, which we've not really seen in a very long time, but if seasonality happens to emerge then we could burn some of this backlog down which would actually be a good thing because we would shorten our lead times up even a bit more.
Very helpful I'll jump back in line. Thanks, Harry.
Okay.
And as a reminder, if you do have a question. Please press star one on your telephone keypad now.
And our next question comes from Julio Romero from Sidoti and company.
Your line is open.
Thanks, Hey, good afternoon, Gary and Rebecca good afternoon Julio.
Hey, good afternoon. So I just wanted to ask another one about pricing.
Curious about the decision not to.
Continue to pass along any price increases in May are you starting to see some push back from.
Customers on price and I'm asking that because.
It kind of seems to be different from the the message of managing price to market, rather rather than cost.
Well we looked at.
The market and we believe we have reestablished a gap between us and them we are demanding a premium for the equipment.
But what makes it a little hard for your side of the table to see is how much of that price increases in the backlog, that's yet to materialize in our financials through the <unk>.
Financial performance of the company so.
Where we gotta be way out in front of this thing.
And and see you know where we're at.
We know that we are again, a premium to the market and we know that the premium is less than it used to be.
But it's continues to be justifiable, so we considered market pricing as well as financial performance. When we made this decision.
Got it yes, no that makes sense.
Turning to the parts business I know you said more to come when supply chain eases, maybe just give us a sense of how much pent up demand is there for parts and how much of that will be able to flow through once supply chain does it use.
Well.
Parts business is growing at a very brisk right.
If we.
Didn't grow the equipment business at such a brisk rate than the percentages would be.
You know quite a bit more in line with our expectations.
Yeah.
As supply chain begins to normalize which it's already begun to normalize its just not totally there, but it's it's doing much better we will see continued acceleration in the parts business I don't believe we'll hit our goal percentage of of equipment sales to part sales ratio.
In 'twenty, three I think that that might be a worthy goal to set for 24, though.
Got it maybe just last one for me I just have a broader question about the operating environment.
Just if you could talk about how that how the operating environment has changed relative to your last call in February .
Well I don't think there's been much change in the operating environment. Since then.
Supply chain issues had already begun to ease maybe.
Towards the end of Q3 going into Q4 last year electronics, we're still a little bit sticky those have become less sticky.
Now its just miscellaneous parts and pieces that arent, great Big dollar volume things too.
[noise] had not historically been sticky at all and in there Ken.
Kind of related to People's Labor, Oh, how much labor they can get as opposed to the materials. They can get so there. There's still you know some of these smaller manufacturers that we source.
Pressure sensors, and refrigeration valves and things like that that.
They they just continue to they're they're increasing their deliveries to us, but it's not to the point, where you can just take your eye off of it and say Hey, I ordered a thousand of these and I know I'm going to get a thousand of them in the normal lead time so.
It is getting better I look for it to continue to.
Improved throughout twenty-three.
And I'm hopeful that we're not talking about supply chain issues in 'twenty four.
Are we all.
Thanks, very much for taking the questions.
Yep.
And seeing no further questions in queue I'll turn the call back over to our host.
I'd like to thank everyone for joining today's call. If anyone has any questions over the coming days and weeks. Please feel free to reach out to myself I have a great rest of the day, everyone and we look forward to speaking with you in the future. Thank you.
Bye bye.
The meeting has now concluded thank you for joining and have a pleasant day.
The host has ended this call good.