Q4 2023 Advanced Drainage Systems Inc Earnings Call
Speaker 2: Hello everyone and welcome to the ADS's fourth quarter and fiscal year 2023 financial results call. We will begin shortly. If you would like to register a question, please press the star followed by one on your telephone keypad. Thank you for your patience.
Speaker 2: Hello everyone and welcome to ADS's fourth quarter and fiscal year 2023 financial results call. We will begin shortly. If you would like to register a question please press star flip by one on your telephone keypad. Thank you for your patience.
Speaker 2: Hello everyone and welcome to ADS's fourth quarter and fiscal year 2023 financial results call and thank you for standing by. My name is Daisy and I'll be coordinating your call today. If you would like to register a question please press star followed by one on your telephone keypad.
Speaker 2: I would now like to turn the call over to your host, Mr Mike Kigan, Vice President of Corporate Strategy and Investor Relations. So you may begin.
Speaker 3: Thank you. Good morning, everyone. Thank you for being with us here today. I have Scott Barber, our President and CEO , and Scott Cottrell, our CFO , with me. I would also like to remind you that we will discuss forward-looking statements.
Speaker 3: Actual results may differ materially from those forward-looking statements because of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K filed with the SEC.
Speaker 3: While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today.
Speaker 3: Lastly, the press release we issued earlier this morning is posted on the investor relations section of our website. A copy of the release has also been included in an 8K submitted to the SEC.
Speaker 3: We will make a replay of this conference call available via webcast on the company website.
Speaker 3: With that, I'll turn the call over to Scott Barber.
Speaker 4: Thank you, Mike, and I appreciate everyone joining us on today's call. Fiscal 2023 was ADS's sixth consecutive year of record revenue and profitability.
Speaker 4: Net sales grew 11% to $3.1 billion, and adjusted EBITDA increased 34% to $904 million, resulting in an adjusted EBITDA margin of 29.4%.
Speaker 4: In addition, net income per diluted share was $6.08.
Speaker 4: I'd like to point out that over the last six record producing years, net sales and adjusted EBITDA have increased at a cager of 16% and 29% respectively, as a result of ADS's strong business model and long-term strategies to drive profitable sales growth above the market.
Speaker 4: Both ADS and Infiltrator executed these strategies well in a dynamic macroeconomic environment of the past 12 months.
Speaker 4: Full year results came in above our guidance range as we executed well to close out the 4th quarter and the year, despite overlapping demand weakness in our core non-residential and residential end markets.
Speaker 4: We had a very strong start to the year with demand, shipping rates, and pricing all favorable.
Speaker 4: Beginning in September , demand in the residential market weakened, shortly followed by weakness in the non-residential market. In response, we made the necessary adjustments to our operations and plan, and executed well against them.
Long term, we remain confident in the non-residential and residential end markets, but we expect the slower pace to continue through this calendar year due to the higher interest rates.
all of which impact the pace of construction and the customer. Despite the short-term weakness in demand, the need for water management solutions remains highly relevant.
We are actively engaging with communities that are improving standards for stormwater and on-site septic wastewater management, staying true to our brand promise to protect and manage water, the world's most precious resource, safeguarding our environment and communities.
value proposition, solutions package.
conversion to plastic from traditional materials, and a unique sustainability position of ADS in water management and recycling.
As one of the largest plastic recyclers in North America, we remain committed to finding innovative ways to increase the use of recycled plastics.
thereby improving the circularity of the plastics economy and giving us additional scale to manage cost and financial performance.
Last October , we broke ground on a world-class engineering and technology center to expand our efforts to innovate with both recycled and virgin plastics.
on a world-class engineering and technology center to expand our efforts to innovate with both recycled and virgin plastics. Develop new products.
effort, and value proposition as companies continue to choose our products for water management in large-scale development projects. While there is weakness in our core markets, the agriculture, infrastructure, and on-site septic markets have a more favorable outlook.
The agriculture economy remains healthy and landowners continue to invest in field drainage is a high return investment to improve crop yields.
We are pursuing growth in new geographies where agriculture drainage is less widely accepted.
In addition, the agriculture market team is actively cultivating relationships with universities, farming groups, and contractors to better understand technologies and opportunities for growth on a very local scale.
Within infrastructure, I'd like to highlight secular growth trends around the infrastructure investment and Jobs Act funds that will come into play later this year, as well as onshoring projects.
the Texas Department of Transportation's approval for the use of thermoplastic pipe last November . We're actively bidding on projects in each of these areas and tracking opportunities to be specified on project plans. This is a great example of ADS's proven market share model at work.
As shown on slides five and six, we had an excellent fourth quarter from a profitability standpoint. Adjusted EBITDA margin increased to a new fourth quarter record of 27.8 percent. 300 basis points above the prior year, despite a 9% decrease in revenue. Favorable pricing and material costs offset inflationary cost pressure.
lower relative infiltrator volume and lower fixed cost absorption from the production adjustments made over the last two quarters.
Non-residential and residential construction activity was resilient in areas like the Southeast, Atlantic Coast, and Southern United States, where we have focused resources over the last five years as a part of our key state sales strategy.
construction activity was resilient in areas like the southeast Atlantic coast and southern United States where we have focused resources over the last five years as a part of our key state sales strategy. The Northeast
Midwest, and western United States remain challenged. Notably, revenue in the infrastructure market increased 6% in the fourth quarter and remained a bright spot throughout the year, with year-over-year increases in each quarter.
From a product standpoint, ADS's HP pipe
Nyloplast catch basins, and water quality solutions all grew double digit year over year.
In addition, sales from infiltrator tanks and Delta active treatment systems also increased this quarter compared to last year.
There is no doubt that the demand environment we are facing today is challenging.
The strength of the seasonal uptick in order activity was not as strong as we would normally see.
We are cautious about the impact from interest rate increases and the effect that local banks tightening credit standards will have on the commercial construction market, which is all reflected in our fiscal 2024 guidance issued today. In the agriculture market, the heavy snowfalls in the Great Plains region have been
prevented contractors from installing field drainage, compressing the spring selling season.
The underlying fundamentals, however, remain healthy in the market, and we expect to see growth in that business in the fall. On our last earnings call, we announced several actions to right-size the business for the current demand environment.
We completed three plant closures and reduced headcount in manufacturing and transportation. We also increased the fleet utilization and reduced usage of third-party logistics services, which resulted in better sequential transportation costs in the fourth quarter.
The actions we took on plant closures and headcount will largely benefit fiscal 2024. We have taken the appropriate steps to level set production and inventory levels, and we will continue to assess our costs and network to take action if necessary.
Scott Cottrell is going to get into the specifics on fiscal 2024 guidance momentarily, but you will see we remain committed to the adjusted EBITDA margin range of 28 to 29 percent.
We will continue to invest in capacity for growth regions and new products.
productivity, maintenance, and automation in the organic business because of the significant long-term opportunity in the stormwater and on-site septic wastewater markets. A strong balance sheet in combination with a strong cash flow generation profile give us the ability to continue investing in the business.
preparing for the upturn that we know will occur in our markets.
Finally, Roy Moore, the president of infiltrator, is retiring at the end of May. Roy's 35-year career infiltrator is full of innovation in products, material science, and manufacturing technology.
His vision and leadership of Infiltrator is remarkable and provided us with a tremendous foundation to continue building upon. As part of a planned succession, Craig Taylor will be taking over Roy's position. Craig joined the business in February 2020 and has been a significant contributor in his relatively short time with us. On behalf of the whole organization, I want to thank Roy for his contributions and wish him the best in his retirement.
With that, I'll turn it over to Scott. Thanks, Scott. As shown on slide 7, we generated $708 million of cash flow from operations in fiscal 2023, converting 78% of our adjusted EBITDA into cash. This is compared to $275 million in the prior year.
increase of 433 million dollars.
One of the most important attributes of ADS is our ability to generate significant cash flow, which allows us to fund our capital allocation priorities.
Our trailing 12-month net debt to adjusted EBITDA ratio of 1.2 times, in addition to over $800 million in liquidity, gives us ample room to continue investing in the business at a higher rate than we have historically.
Our investment initiatives are focused on growth in regions like Florida and the Southeast, and increasing investments in productivity, automation, as well as de-bottlenecking our recycling operations.
We are also investing in a world-class engineering and technology center to increase our focus on material science as well as accelerate product innovation as well as our manufacturing processes.
In Fiscal 2024, we expect capital expenditures to be between $200 and $225 million as we invest in these initiatives, putting us on our front foot for when our core and markets return to growth.
In Fiscal 2024, we will remain committed to our capital allocation priorities.
of, in order, investing organically in the business, acquisitions, share repurchases, and our quarterly dividend to shareholders.
Importantly, today we announced a 17% increase in our annual dividend to $0.56 per share from $0.48 per share in fiscal 2023.
Moving to slide 8, we present our fiscal 2024 guidance based on order activity, backlog, and current market trends.
We expect revenue to be in the range of $2.6 billion to $2.8 billion. In terms of phasing on a year-over-year basis, we expect revenue to be down 15 to 20 percent in the first half of the year and flat to down 10 percent in the second half of the year. Adjusted EBITDA is expected to be in the range of $725 to $ horizontal mass.
on our expectations for next year.
We expect normal seasonality during the year for revenue, with approximately 55% of expected revenue coming in the first half.
We expect demand weakness in the non-residential and residential markets to continue, with better end-market dynamics in the infrastructure, on-shoring, agriculture, and active on-site septic businesses.
We expect price mixed materials to remain favorable year-over-year, driven by favorable material cost expectations. Over the last two fiscal yearsterm Intel investor
we expect price mixed materials to remain favorable year over year driven by favorable material cost expectations. Over the last two fiscal years, price mixed materials have been
Favorability has primarily been driven by our pricing actions.
Manufacturing costs will be under pressure as demand softness will result in lower fixed cost absorption.
In addition, we continue to see inflationary cost pressures on labor and utility costs.
Lastly, transportation is expected to be favorable due to greater utilization of our fleet versus third-party carriers, as well as favorable trends in diesel and third-party logistic costs.
Before turning the call back over to Scott, I'd like to point out that there are two slides in the appendix of today's presentation that I encourage you to look at.
Based on market growth, inflation, and the addition of the active onsite septic market, our total addressable market is now an estimated $15 billion, the details of which can be found on the slide.
In addition, we provided a slide with details on the timing of commercial construction projects, giving context to when ADS products are involved in the project timeline.
And we provided a slide with details on the timing of commercial construction projects, giving context to when ADS products are involved in the project timeline. With that, I'll turn the call back over to Scott.
Thanks, Scott. A couple of key items I want to highlight before we open it up for questions. First, and I know it's at top of mind, April results on a consolidated basis were marginally better than expected against this guidance that we spoke to today.
Second, as demonstrated in the guidance we issued today, we remain committed to the 28 to 29% adjusted EBITDA target through fiscal 2025.
We'll continue to manage our cost and production to meet these commitments, but importantly, we want to be able to service our customers as the upturn comes about.
And we'll always keep that in mind. Last, there's still significant opportunity for both ADS and Infiltrator to increase share in our end markets.
The proven market share model gives us confidence in these increased capital investments we have planned for fiscal 2024. We will use this period of slower demand to invest in this capacity in important regions, some new products, and more.
model gives us confidence in these increased capital investments we have planned for fiscal 2024. We will use this period of slower demand to invest in this capacity in important regions, some new products, automation, and more.
safety improvements, and maintenance to ensure that when the market ramps up, we have good service and the right capacity to be the partner of choice in our markets. The ADS value proposition, solutions package, conversion strategy, and unique sustainability position in water and recycling remain highly relevant.
and we're committed to being the leader in these sustainable water management solutions.
So with that, let's open it up for questions.
that let's open it up for questions. Thank you.
As a reminder, if anyone would like to register a question, please press star followed by one on your telephone keypad.
Please ensure you are unmuted locally and if you would like to withdraw your question, please press star followed by 2. So that's star followed by 1 on your telephone keypad to register a question.
Michael Halloran from Baird. Michael, please go ahead. Your line is open.
Hey, good morning everyone.
Congrats to Roy as well. So a couple things here. So when you think about the upper end of the guidance range and the lower end of the guidance range.
Could you just talk loosely to what that environment entails? I'm not looking for something numeric. I'm more thinking about what type of landscape are we in on the resi non res side at the high end and the low end? And how do you think that compares to what a bottom might look like from an end market perspective? Thank you first of all.
Roy's a pretty happy guy, Mike, I have to admit. And we had a nice handoff with him with our board. I get that....
It will miss him.
So I would say the upper end of the guidance, if I get your question correctly, what set of events would have to occur to get to that upper end?
then what set of events would have to get occur to get to that lower end?
And I think at the upper end, we certainly have to see a quicker upturn in the demand environment.
which is weak. We're probably in our worst part of the demand environment. Right now, as our market's weaknesses are overlapping between residential and non-residential. And I would say to get to that upper end of the guidance would require a quicker upturn than the plan. sedimentation
and a continued favorable price and material environment. Now we're working the price really well right now. The material environment is pretty good, but if there was some extraordinary event that took it down.
you know, that would be getting us towards the upper end of the guidance, let's say.
The lower end of the guidance clearly would be more non-in particular non-residential weakness. If you ask me what keeps me up at night, it's the effect of tightening credit standards on local and regional banks, which are the lifeblood of those construction projects that were out there. You know, that's kind of our meat and potatoes stuff.
Now, the infrastructure, the on-shoring, that offsets some of it, but not all of that meat and potatoes. So, the lower end of the guide would be governed by kind of the opposite effects. You know, this worst non-residential market, and then if there was some extraordinary event around materials that took them the wrong way.
or the pricing plan. We think we have a very good handle on the pricing plan, but thinking about those things we can't control, that would worry me on the lower end of that guidance.
No, that makes a lot of sense. When you think about the customer, the interactions, and what they're saying, are you sensing that a lot of – there's just hesitance given some of these – the credit tightening standards? Is there pent-up demand anywhere in the market?
And maybe the better way to ask the question is Also give some context on some of the pockets in the non res space where you're seeing a little bit more strength where you're seeing A little bit more weakness In the market as we see here I smile because Some of our sales leadership is described as the demand is out there. There's just no financing for the demand
particularly in the non-residential, there is hesitancy in some regions to move forward with projects either because of increased kind of equity requirements around those real estate projects or worry about you know vacancy rates in that area.
There's others that things are pretty robust. You know we always talk about the Atlantic coast
Southeast, Texas, where we are in Central Ohio, very robust. But we do go to other places, particularly out West.
Not so robust, much more hesitancy to pull the trigger. The Northeast, a lot more hesitancy to pull the trigger on new projects, and that's where we see the most weakness.
Onshore has been strong. We're pursuing a lot of projects in the onshore. Scott makes a good point. We're actually actively shipping against some that are battery and electric vehicle related. We're in pursuit of many
projects on that, the business development platform that we developed to pursue residential home builders and the warehouses and the data centers has been a perfect vehicle for us to plop this type of activity on. And as you all know, there's probably there's a partnership between either the That's
There's different engineering firms, sometimes different contractors, different relationships, but we've made that pivot over the last kind of six, nine months pretty well, I think. Great, really appreciate the time, everyone. Thank you.
Right, thank you. Thank you. Our next question today comes from Matthew Boulley from Barclays. Matthew, please go ahead, your line is open. Morning everyone, thank you for taking the questions.
So, just a question on kind of the longer term margins, obviously you're guiding to a margin in fiscal 24 that is effectively in line with your 2025 investor day outlook as you mentioned. So, should we think that, you know, look, if you're able to do that type of margin in a year that's clearly pressured by volumes in the end markets.
I'm not necessarily looking for guidance, but you know, how do you think about what the kind of structural profitability of this business can look like? Assuming we have a recovery in those end markets.
guidance, but you know how do you think about what the kind of structural profitability of this business can look like, assuming we you know have a recovery in those end markets. Thank you.
Okay, Matt, that's kind of the eternal question of, you know, what's the ultimate profitability level of the company? And, you know, we're pretty pleased that we got to the, you know, the long term, the three year investor day target in the first year actually went a little bit past it.
And we have a lot of confidence to be able to stay in that range. And as we look at kind of that next plan, there's probably another leg up in that 150 basis point type of range where we could get in that next three-year plan. So as you kind of look out, we don't think that we've topped out. throughout
in market share or in our ability to drive increased profitability in the business.
You know, price, material cost, the mix of infiltrator and allied products that drive a lot of gross margin improvements in that. We've added to that the ability to, you know, it's not been easy but in the pipe business trying to get our arms around some of the conversion costs in that.
through the automation, a couple plant closures and things. So the four tools remain there, price, mix, materials, all of that stuff. These other ones that we will add to the, have been adding and will continue to add to the mix will be important tools. So.
I don't think we're done yet, I guess would be my summary. The only thing I'd add to Scott's point, we talked about the fact we're still really investing in the business. So when you look at it on the restructuring side so that our cost structure is more reflective, that adds to when demand comes back to the ability to leverage the enterprise better. And then the investments we're making in de-bottlenecking our recycling and the engineering technology
we're investing in that. So I think that profitability part Scott mentioned, not only the growth piece, but that profitability piece lends itself really well to a margin story as we go forward. We're not done yet. We're not done yet.
Got it well, well said, thank you for that. And then I guess 2nd, 1, I wanted to ask on the residential side. Obviously you're seeing some signs of particular in the new side. Uh, you know, early signs of improvements and construction activity, I guess the question is, you know, obviously you guys have direct exposure there on the land development and septic side. So, you know, number 1.
I mean, how is residential contemplated within your full year outlook? And number two, what would the kind of knock on effects be to your nonresidential business if you do see this continuing trend? Thank you. Thank you.
is residential contemplated within your your full year outlook? And number two, you know, what would the kind of knock on effects be to your non-residential business if if you do see this continuing trend? Thank you.
We see all those same things that you just mentioned in land development, the onsite septic. I'd say right now, the
We're waiting for some of those things to develop and impact us. We hear the talk, you know, we see some activity, but it hasn't really manifested itself in orders and demand for us.
So it's kind of, Matt, I think not this quarter, if it's going to happen, it's going to happen in the back end. Our customers in some of these spaces certainly feel better today than they did in November .
Yeah, Matt, my kick is I would agree with what Scott said. I think we will know more as when we get to September . It's just too early to call right now. Much too early to call kind of call it 6 weeks into. Our fiscal year, I think, as Scott mentioned April results were marginally better than.
kind of the plan that we laid out in front of you today. But we'll know more as we go through the summer. Clearly there's some good positive commentary around residential right now. But again, kind of where we play in the space, it's going to take some time for that to work through.
That would be beneficial to our non-res business. I mean, that would signal to us, Matt, that let's say we get to September and we feel much more positive about the residential. That would signal to us that the non-res will follow in four to six months, for sure. That would be a nice day at ADS. See you soon.
Thank you.
All right. Well, thank you gentlemen and good luck guys.
Alright, thank you. Thanks, Matt. Thank you. Our next question is from John Lovalo from UBS. John , please go ahead, your line is open.
Hey guys, good morning. Thank you for the questions. This is actually Spencer Kaufman on for John . First one, I think you guys mentioned seeing a pullback in material costs as well as transportation. How sustainable do you think your current pricing is if those costs continue to come down? And what would need to happen for WMS to have some price go back?
inflationary cost pressures we're still seeing in labor and utility costs and and others but again you look at the pricing we've got over the last couple years we'll hold on hold on to the majority of that.
Okay, got it. And just on the CapEx, when you guys talked about some of the projects that you're investing in this year, but maybe just longer term, how should we think about CapEx sort of exiting the year? Is it fair to assume some type of normalization here? And really the reason I'm asking you is because if we just look at your – All right. Thank you.
the CapEx guide in your investor day outlook versus what is probably going to happen. I would imagine you guys are probably going to be a little bit higher than that. I'm just curious how you guys are thinking about that moving forward.
Yeah, I would say taking kind of $167 million to CapEx this prior year, the 200 to 225 range that we're talking about here in fiscal 24, I would say we're going to have at least another year or two of accelerated spend at these levels based on our current trajectory.
There's just so many opportunities to invest in the business in North America, water right now, and in our own business. It's the highest return, lowest risk use of our capital. And right now, based on the cash flow generation, that conversion ratio that we mentioned earlier of our cash flow from operations to adjusted EBITDA.
And our leverage, again, we ended last year, fiscal 23, at 1.2 times. Our guardrails or target leverage is 1.5 times. And we want to put that balance sheet to use. So we will. And then if our forecasts come to be and we have excess cash to hit that kind of leverage target.
then we'll return that cash to our shareholders through the share repurchase program that we've got and continue to optimize our capital allocation, capital deployment that way. So we're very much committed to it. We very much know that being flexible and optimizing capital allocation and deployment priorities.
is a significant strategic lever that we have, and we'll fully plan on taking advantage of it here over the next couple of years.
Thank you. Our next question is from Joe Alismair from Deutsche Bank. Joe, please go ahead. Your line is open. Hey, good morning, everyone, and nice finish to the year. Thank you. Thanks, Joe. Yeah. Hey, so you talked qualitatively now about the deflation. Would you mind maybe just dimensionalizing that a bit more, what's baked into your range today from a, what I would I guess call a gross materials number relative to a gross price mix number?
Yeah, so the way I would talk to it, Joe, is the EBITDA bridge and waterfall chart we present in our management presentations quarterly at the end of the year does a good job of showing that price-cost bar. And if you look over the last couple years, that bar has been green, and we commit to that bar to be green as we move forward and as we've generated or performed historically. But the last couple years, it's been no secret. In this takes care of exactly at the, at the EBITDA Jenna DeM priorities we're initially less vacations and Seeing from an ID really helped understand why the, the In relocation dating some of the squeeze. Obviously it did a lot of work in 2019 20overty, direct Idea. The idea is to give you a great idea of how to survive growth for five years, and hope that you're new to them. And q and Affiliate dolls, Drawn him apoint in time to a backyard. PRlight now says, G r Lyn Chinese Csl
smart about that locally like we always are. We have competition like everybody does, so we'll be smart about that and look at that. We also have end market, which is a little bit, we don't have the conversion story in agriculture, that we got to be sensitive to competition there. That's a little bit more of a commodity-based business. So those are things that are a buy-in to sell to industry as weummy launched in407. The same goes for hospitality based businesses, because! After question we tend to be a minus. For owns of a technology, people are being asked, why? Is that all from other checkout sites?
either in on the resin side, in our labor cost side, utility or energy cost side, any of those types of things that go in a way differently than what we expect, we've got the ability to pivot and make that happen. And our sales guys do a great job of keeping that in front of them and making sure that we adjust accordingly. Where to Start
Thanks for that color. I hate to be the April guy, but if I could just dig in on the comment about it coming in better than what you had outlook for the first half, down 15 to 20, maybe just contextualize that comment a little more, whether it was driven more by non-RES or RES.
I would say that the outperformance was led by residential.
more than non-residential. The kind of sales revenue in total kind of came out about where we thought it would in line with his guidance.
than non-residential. The kind of sales revenue in total kind of came out about where we thought it would in line with his guidance, but there was slightly better mix.
and slightly better price and material performance and transportation than we anticipated as we were putting together the plan for the month. Yeah, the word we'd like to use, hey, we had a decent month.
Right? It's not a data point to extract for the whole year. It's had a good month. We knew people would want to know. We're slightly ahead of plan. You know, May's looking okay. It's a plan. We're executing against that plan.
What I'd like to kind of say is, you know, there's it's early in the year. This uncertainty around non-residential and the lending standards is real. It affects how people...
go and start construction projects. And as you all know, and it's in the chart, where's that front end of the construction process in the ADS business?
So if this stuff gets, wavers a little bit, I mean that impacts us and we're, we just do not want to overestimate what that could be to us, and that's what we put in this guidance. Had a good start, you like to have a good start to the year and the quarter, that's what we did and we'll keep working it.
Understood. We obviously appreciate the additional detail. Good luck in the quarter, guys. Thank you. Thanks, Jeff.
Thank you. As a reminder, if anyone would like to register a question, please press star followed by one on your telephone keypad.
Our next question comes from Jeff Stevenson from Loop Capital. Jeff please go ahead your line is open.
Thanks for taking my questions today. So infrastructure growth looks like it accelerated during the quarter and wondered how much of that are share gains versus overall market growth? And then are you seeing any meaningful flow through yet in IIJA funding or is that more of a back end?
improvement is probably minimal share gain.
You know, I Think the real share game will be coming in the future as we get specified on projects in Texas
as we get specified on projects in the east coast and or the southeast and in Florida where we know our share gains, but probably minimal share gains last year in that performance. So it was more just money beginning to flow from that IIJA.
That said, I wouldn't call the IIJA funds flow to date. What has that been, two years now since that was approved, probably? Roughly.
I wouldn't say all of it has been flowing in our kind of direction yet. A lot of that money is our guys are out in the field.
has been on repair and replace, asphalt, bridges, services, designs. So the capacity adds of roads and highways, which is really where we play, is, I think, yet to come in those spending packages.
Yeah, Jeff, Mike Higgins, I again, just to kind of reiterate what Scott said, you know, we'll go back. I think, you know, the growth really has been. Over the past year, yeah, and kind of our traditional states where we have more much more mature approvals and activity was pretty good there. You know, the Texas thing is starting to ramp. You know, we're seeing pretty good success there, but, you know, real early, not material amounts of sales and.
You know, what the feedback we get from our guys in the fields and our team is very close to the infrastructure market is just what Scott said. 50% or so of the funds that have been kind of out there. I've really gone to repair and reconstruction work, which can be mobilized on pretty quickly. So that's repaving of roads. Maintenance, et cetera, like that the stuff where we will play new construction capacity expansion.
for transportation is really still on the come. And kind of best knowledge now is that stuff you'll start to see kind of release and flow into the back half of the year again. Back half of the next year. Yeah, I mean, this is a multi-year program. I don't think you're going to see, at least for us, you won't see one big spike in volume or activity. We'll look back on this four or five years from now.
And we'll see, hey, our share and our volume of what we're selling is some decent amount better than where we are today. Okay, very helpful, Keller. And then my second question is just on how do you set one thing exactly?
Sure. Could you repeat your question? I'm sorry. I'll add my thing in after you repeat your question. I apologize.
Sure. Could you repeat your question? I'm sorry, I'll add my thing in after you repeat your question. I apologize. Okay.
Yeah, no worries. Yeah, just on kind of how you view inventories right now and this is the stocking over
Yeah, Z stocking is over. No doubt about that. It primarily occurred at Infiltrator, it exclusively occurred at Infiltrator. We've worked through that, we talk a lot about that with Roy and Craig and the team, and we feel very confident that's kind of done. Their pace of order intake and ship.
is right back to where it was pre-pandemic. It's a pretty quick turnaround business. And what I was going to add, and I apologize for tacking something on to Mike's thing, is I think the most important thing about that multi-year program on infrastructure is that we've made the investment.
Organizationally in in sales talent and pursuits to make that happen. You know we're not waiting for Al thoses. You know the exact right time in a bit pacage comes out certain two years ago- there are plus two years ago when we read: did some reorganization stuff.