Q2 2023 Hillman Solutions Corp Earnings Call
Okay.
Good morning, and welcome to our second quarter 2023 results presentation for <unk> Solutions Corp. My name is Amy and I will be your conference call operator today.
Before we begin I would like to remind our listeners that today's presentation is being recorded and simultaneously webcast. The company's earnings release presentation and 10-Q were issued this morning. These documents and replay of today's presentation can be accessed on helmets investors relations website at IR.
Got him in group Dotcom.
I would now like to turn the call over to Michael Caylor with Hillman.
Thank you Amy good morning, everyone and thank you for joining us I am Michael Taylor, Vice President of Investor Relations and Treasury. Joining me on today's call are Doug Cahill, Our chairman President and Chief Executive Officer, Rocky Kraft, Our Chief Financial Officer, and John Michael Adenopathy, Our Chief operating Officer, who will begin today's call with a business update.
Highlights from Doug followed by a financial review of the quarter from Rockies before we begin I would like to remind our audience that certain statements made on todays call. Maybe considered forward looking and are subject to the safe Harbor provisions of applicable securities laws. These forward looking statements are not guarantees of future performance and are subject to certain risks uncertainties assumptions and.
The other factors.
Many of which are beyond the company's control and may cause actual results to differ materially from those projected in such statements. Some.
Some of the factors that could influence our results are contained in our periodic and annual reports filed with the SEC for more information regarding these risks and uncertainties. Please see slide two in our earnings call a slide presentation, which is available on our website.
In addition on today's call, we will refer to certain non-GAAP financial measures information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation with that it's my pleasure to turn the call over to our chairman President and CEO , Doug Doug.
Thanks, Michael Good morning, everyone.
I will begin today's call going through a few highlights for the quarter, where our results were in line with our expectations and then give an update on our full year guidance, which we're maintaining at our previous levels. After that I'll give a quick overview of hellman touch on our traditional hardware channel and then provide some additional color.
<unk> on the quarter before I turn it over to Rocky <unk>.
More details on our business.
Net sales in the second quarter of 2023 declined three 6% to $380 million from from a year ago quarter total volumes were off about 6% and we saw a 1% headwind from unfavorable FX in our Canadian business. These were partially offset by 3%.
Lift from price.
Top line was a tick below our expectations due to volume softness across the board and Pat engraving in particular, but we expect a stronger second half, particularly as less challenging prior year comps new business wins, and we are confident we will see top line growth for 2023, which I'll get to.
In a moment <unk>.
Adjusted EBITDA in the quarter totaled $58 million, which came in line with our expectations. Despite the lighter topline for the quarter, we did a nice job controlling costs and maximizing operational efficiencies.
This was a strong accomplishment given the high cost of goods.
Boeing through our income statement during April and May as we work down inventories dating back to the record high <unk>.
Dinner cost from the summer of 2022, we are now setting on the right side of the power curve and maintain our belief that adjusted EBITDA generated during the second half of 2023 will grow 20% over the second half of 2022.
Free cash flow in the quarter totaled $65 million, bringing the year to date total to $78 million ahead.
Ahead of our expectations, our supply chain team did an excellent job managing down our inventory, which combined with our tight cash management resulted in a meaningful working capital benefit we.
We have used our free cash flow to pay down debt, which has reduced our leverage profile, which we will get to more in a moment.
As a result of our healthy results during the second quarter and our line of sight to new business coming online in the second half we are reiterating our full year guidance expectations across all three metrics. This includes net sales to be between 1.45 to 1.55 billion.
<unk> EBITDA to be between $215 million to $235 million.
And free cash flow to be between $125 million to $145 million.
I would now like to give a little background on helmer to reiterate what makes US a world class partner for our customers as one of the largest providers of hardware products and solutions in North America. Our extensive range of products scanner do the needs of the pickup truck pro as well as the diyer, giving them the right.
Products still repair remodel and maintenance projects, which makes up the vast majority of our sales demand.
Since our founding in 1964, we've achieved remarkable success experiencing topline growth of 58 out of 59 years. This record is due large part to the consistency of demand in both up and down economic cycles, and repair remodel and maintenance markets that we serve.
This track record is also due to our competitive moat, which sets us above our competitors and consists of three main differentiators, one or 1100 member in store sales and service team, which delivers best in class service to our customers to our ability to get the right.
Thanks to the right place at the right time at scale with our store direct model.
Cost effectively sources over 112000, skus and distributes them to over 40000 individual locations.
In total approximately 75% of our shipments are delivered store direct and 390% of our revenue comes from brands that we own meaning we can maintain control over innovation marketing production and distribution, which allows us to quickly adapt to meet the needs of our customers.
And our end users.
We are embedded with our customers, who view us as partners critical to the success of their business, we help them overcome labor complexity in supply chain challenges and all important high margin traffic generating product categories, we offer.
Our customers range from mass retailers to big box home improvement centers, the national regional and locally independently owned hardware stores.
I'd like to demonstrate our moat secures our position in grains us with our customers in particular in our traditional hardware channel, which makes up 23% of our business and we believe as a total market size of nearly $700 million per year.
Today Ace two value do it fast and the independent hardware stores make up the 12000 stores in this channel that we service we provide multiple hardware categories for these customers, including nails and screws.
Core and specialty fastener products solid in hollow wall anchors picture hanging hardware letters numbers and size threaded rod shapes and metal sheets.
Duplication services knife sharpening services and protective gloves, just to name a few our fastener installations do these customers are typically 72 to 96 feet long.
And construct as long as 200 feet in some stores.
These hardware stores typically carry 15000, skus, which account for more than 15% of the items purchased at those stores.
Our sales and service team cover these hardware stores across the country. These reps work hand in hand, with the owners and store management their in store, writing orders managing inventory and promos organizing and cleaning displays managing helman products in the aisle and servicing.
Geos.
You can see how helmet is embedded with these hardware store customers and we continue to take great care of them. During a time when other suppliers continue to struggled meeting the expectations of their customers. For example, we converted about 150 stores from our competition last year.
The traditional hardware stores thrived by differentiating itself by offering high levels of customer service and advice for every kind of home maintenance repair and remodel products at stores conveniently located in their customers' neighborhoods our commitment to customer service.
Yes.
Really.
Flex that of these small business owners as the independent hardware stores have won market share and expanded their footprints. We have grown right alongside them and are excited to continue to grow with them in the future.
Now, let's move to our top line results for the quarter.
Net sales for Q2 2020, we were impacted by lighter volumes, resulting from a reported 8% decline in foot traffic at home improvement centers versus the year ago period.
Despite foot traffic declines our topline results continue to illustrate the resilient demand driven by our diverse product offerings that serve repair remodel and maintenance projects. This is evidenced by our hardware solutions being up nearly 4% in the first half of the year while we.
Full year top line growth in Hs between four and 5%.
In fact in our results were four days of shipping delays in June across our business outside of our kiosk following a ransomware attack that affected our it systems over the course of the following week, we restored production and shipping at all of our facilities in normal operation activities resumed.
As a reminder, we have been in the process of moving our distribution hub from Rialto, California to Kansas City over the last several months and the cyber incident added a bit of disruption to the move while some of our short term service levels are being impacted we believe these will not impede our second half results and the <unk>.
You will be cleared up by the end of September .
Further we believe the move to Kansas City.
Will result in efficiencies and cost savings as soon as Q4 this year.
Let me frame up the second half of the year in terms of <unk>, we expect to see and how those will help us hit our sales goal first we have sizable new business wins coming online in the second half of the year with two of our top five customers. Two we will additionally, launched numerous small wins in <unk>.
Rollouts across our vast customer base three some sales have shifted from second quarter to later in the year to the aforementioned shipping delays.
For the promotional calendar for the second half of the year is locked and loaded for a protective solutions business. We expect sales to pick up as a result ex COVID-19 sales, we expect our full year PFS results to be roughly comparable to 2022 and lastly, the comparable period during this.
Half of the year gets a bit easier as last year, our customers focused on destocking, particularly in the Pes business and our sales were impacted as a result.
With that let's move to our balance sheet.
Regular topic of discussion with investors has been our strategic investment in inventory during 'twenty, one 'twenty two as lead times from Asia went from 120 days to 250 days.
We had to make a tough decision to lever up to ensure we continue to take care of our customers or watch our fill rates fall we have.
Investment in inventory insurer, we took care of our customers during a challenging supply chain environment, we delivered when some of our competition good not our fill rates averaged more than 90% during 2021, 96% during 2022 and approximately 96% on <unk>.
<unk> for the first six months of 2023, we believe our performance over the last three years has continued to help separate us from the competition and has resulted in our numerous new business wins.
A result of this investment was that our leverage and inventory on hand increased through 2021 in the first half of 2022 at the peak during the summer of 'twenty to 'twenty, two we carried about $180 million more than normal.
Since that peak, our supply chain has normalized and our inventories have been reduced by 145 million, including $38 million during the first quarter and $21 million during the second quarter of this year.
The result has been a meaningful working capital benefit healthy free cash flow and subsequent reduction in debt, which we expect to continue throughout the year at.
At quarter end, we were still carrying nearly $40 million more inventory than normal. So we still have some working capital benefits ahead of us. We believe it's very realistic that we reduce inventory, but at least an additional $15 million or a total of approximately $75 million for 2023.
This would put us near our normalized inventory run rate at the end of this year.
Now turning to price and cost.
2020, we've seen a 200 and <unk>.
$45 million of cost inflation, which we have passed onto our customers on a dollar for dollar basis through multiple price increases the last of which went into effect in the fall of 2022.
These cost breakdown to approximately $120 million of transportation and shipping.
$90 million of commodities and $15 million of labor.
The $120 million of transportation and shipping about $80 million of that is related to ocean containers over.
Over the past few quarters, we've seen ocean container costs come down which will be a tailwind for us in the second half of the year and into 2024.
Additionally, we continue to see volatility in the steel markets and has seen steel prices come down recently.
Typically costs related to raw materials like steel can take between nine and 12 months to flow through our income statement that consists of 150 days of lead time to source the material make the product is shipped to the U S and our inventory turns at about 4% to six months.
All that said some costs are not going away like labor cost.
Others remained stubbornly high like outbound freight, including less than truckload delivery costs. For example, we will focus on productivity gains to help offset these costs just like our customers continue to do Hillman in store service team and direct store delivery model continue to be on.
Trend, helping our customers minimize these two pressure points.
Our cost of goods sold for the quarter were improved over the peak last quarter, but still high on a historical basis, indicating we have further room for improvement the sequential 150 basis point improvement in gross margin percentage. During Q2 reflects the benefit of lower container costs that we.
Paid last fall following the historical high paid last summer.
Archie and our markets before I turn it to rocky our volume.
Has held up well given the slow pace of the U S home spending this year, our business is over 90% repair remodel and maintenance and less cyclical strategy of home spending enabled within R&R. Our products are historically more insulated than other R&R categories because they're.
Mahler ticket items.
Easy to use and have generally broad based applications for multiple projects around the home.
This cost the macro benefit of an aging housing stock and broad accessibility of our products provides a structurally sound long term outlook, we think for our business based on construction that was completed during the early to mid 19 nineties, we will see over $1 5 million.
New homes turned 20 years old next year and over one 6 million new homes turned 20 and 2025 as homes H <unk>.
Homeowners spend to repair remodel and maintain their homes.
Our business better.
As I've discussed starting in the second half of this year our business is set to benefit from several solid tailwind. These coupled with our organic growth plans and market share gains and improvements in our inventory and leverage and the consistent performance of this company throughout all cycles.
Will lead us to an even more exciting future for Hillman.
We are successful.
And profitability executing our growth strategy is generating strong cash flow and we're staying disciplined with capital to create shareholder value. We expect that to continue as we go into the rest of the year with that let me turn it over to Rocky.
Thanks, Doug.
As Doug mentioned net sales for the second quarter of 2023 were $380 million, a decrease of three 6% versus the prior year quarter.
Slight decrease we are confident about our revenue guidance, considering the new business wins and other initiatives mentioned earlier.
The midpoint of our net sales guidance assumes market volumes for existing products declined 1%.
Benefit 2% from price that will roll through 2022.
And new business wins, offset last year's Covid related sales.
Now, let me provide some more detail on our top line by business.
Hardware solutions is our biggest business it makes up over 50% of our overall revenue.
For the quarters quarter net sales were approximately flat at $225 million as compared to last year.
This breaks out to approximately 3% of price offset by a 3% decline in volumes.
Robotics and digital solutions, our Rds makes up about 15% of our overall revenue.
During the quarter Rds net sales were down 2% to $62 5 million driven by a decrease in engraving.
<unk> duplications and manual key duplication, partially offset by a 19, 2% increase in sales from our self service key duplication machine Mickey.
Our Canadian segment, which makes up about 15% of our overall revenue was down nearly 8% compared to the prior year.
This was driven by approximately a 3% decline in volumes and five points of negative FX headwinds during the quarter.
Lastly, our protective solutions business makes up just under 20% of our business.
<unk> revenues were down nearly $9 million or 17% compared to last year.
This was due to lighter foot traffic and the timing of promotional activity in early 2022 compared to a more back half loaded promotional calendar this year.
As Doug mentioned, we have all of our promo activity locked in for the rest of the year, which is a busy second half.
Additionally, we will benefit from the launch of some new business during the second half of the year.
These reasons, we continue to feel confident about PFS being in line with 2022, when backing out opioid related product sales from the prior year.
Adjusted earnings per diluted share for the second quarter of 2023 was <unk> 13 per share compared to <unk> 14 per diluted share in the prior year.
Second quarter adjusted gross profit margin decreased by 110 basis points to 43% versus the prior year quarter as the high cost of goods sold were flowing through our income statement for April and May as we worked out a large portion of high cost inventory from last year.
However, sequentially margins improved 150 basis points.
We expect to see margins expand sequentially by over 100 basis points next quarter, then exceed our historic rate of 44% to 45% during the fourth quarter.
Q2, 2023, adjusted SG&A as a percentage of sales decreased to 27, 9% from 28, 2% from the year ago quarter.
This improvement was driven by realizing efficiencies in our operations and logistics and controlling costs, where we were able.
Adjusted EBITDA in the second quarter was $58 million compared to $62 3 million in the year ago quarter.
Adjusted EBITDA reflected higher Cogs, coupled with the decline in net sales when compared to last year.
2023 is proving out to be the tale of two halves adjusted EBITDA for the first half of the year was down seven 6% versus last year, which was in line with our expectations and we are expecting second half adjusted EBITDA to be up approximately 20% over last year.
Breaking this down by quarter, we expect our Q4 2023 growth to be greater than our.
Q3 2023 growth.
As we think about the opportunities that lie ahead for the remainder of the year, which we discussed on this call. We are confident reiterating our original adjusted EBITDA guidance.
Now turning to our cash flow and balance sheet for the 26 weeks ended July one 2023 operating activities provided $115 million of cash as compared to $15 million a year ago period.
Capital expenditures were $37 million compared to $28 9 million in the prior year quarter.
We continue to invest in our Rds Mickey three five to 3.0 machines and important part of our high margin future growth opportunities.
A quick update on our new <unk> three five machine.
As you know, it's a Q1 2020 for launch.
We will be adding automotive and RFID <unk> capabilities to our new <unk> machine.
We saw an anxiety of exciting demo of the machine at our board meeting last week.
Our design validation phase will be completed this month and in October we will complete our production validation phase.
We will then have test machines in the stores during the fourth quarter of this year.
Full production at our Tempe, Arizona facility will begin during the middle of the first quarter of 2024.
Our engineering supply chain and manufacturing teams are doing an excellent job and our customers are very excited about the new markets. This exciting technology will enable us to attack.
Now, let me turn back to the balance sheet net inventories were $430 million down to $59 3 million from the end of 2022.
We ended the second quarter of 2023 with $813 8 million of total net debt outstanding marking a meaningful reduction of $73 $9 million from the $887 7 million at the end of 2022.
Free cash flow for the 26 weeks ended July one 2023 totaled $78 million compared to a cash burn of $14 1 million in the prior year period.
This positive swing was driven by the conversion of our prior investment in inventory to cash.
Similar to our net sales and adjusted EBITDA, we feel very comfortable reiterating our free cash flow guidance based on the increased back half profitability and improvements in our working capital.
We ended the second quarter of 2023 with approximately $321 million of liquidity, which consist of $283 million of available borrowing under our revolving credit facility and $38 million of cash equivalents.
Our net debt to trailing 12 month adjusted EBITDA ratio at the end of the quarter was four times as compared to four two times at the end of 2022.
Looking forward, we maintain our expectation that we will end 2023 under three five times leverage assuming we come in near the midpoint of our guidance.
As we look to the second half of the year, we remain committed to using our free cash flow to pay down debt.
On July 31, we drew $80 million on our ABL credit facility to reduce the principal on our term loan by the same amount.
Due to the favorable interest rate spread between the ABL on the term note, we expect to save at least $400000 of cash interest this year.
While not a large amount of savings the high level of visibility and confidence in cash flows during the second half of the year allows us to prudently manage our balance sheet.
De levering will remain our focus during the second half of the year as margins expand and we use our free cash flow to pay down debt and adjusted EBITDA grows.
As we look further out our long term growth target of 6% organic net sales at high single to low double digit organic adjusted EBITDA growth before M&A remains intact from.
From a leverage standpoint, our long term goal is to run the business around two five times.
With that let me turn it back to Doug.
Thanks, Rocky I want to emphasize my belief that we can capitalize on the opportunities that lie ahead of us throughout 2023, and 2024, we remain humble and committed to providing exceptional service to our valued customers with a unique business model that includes.
1100 dedicated field sales and service professionals, along with our efficient direct to store delivery approach, we consistently deliver value to our customers a value that they genuinely appreciate and recognize we executed well during the second quarter and believe we've got the right people and strategy in place they have a.
Great second half of 2023.
Which will lead to sustainable long term growth and create significant value for our customers associates and stockholders with that we will begin the Q&A portion of the call. Amy can you. Please open the call up for questions.
As a reminder to ask a question. Please press star one one on your telephone.
For your name to be announced to withdraw your question. Please press star one again, please limit yourself to one question and one follow up.
Our first question.
Comes from Dan Manthey with Baird. Your line is open.
Yeah, Hi, Dave Manthey here.
Everyone.
Yes.
My first question can you hear me.
Yes, yes, good alright, and first question is on.
The visibility that you have into the back half of the year. When you think about the factors you mentioned, the new business wins, Rds placements promotions and youre declining cogs versus shelf pricing.
As you look at that and you compare that to your guidance should we think about it as that if if foot traffic is worse than expected will be on the low end, if it's better than expected. We're in the high end or is the bell curve of potential outcomes wider than that I'm, just trying to understand those specific items that you've listed how.
Much visibility to those give you relative to the overall business.
Hey, David drop yet.
We've said all year and nothing has changed really the only variable.
Our guidance for the year is that traffic aspect and what our volumes are because of the traffic aspect and so our current guide would suggest down one.
Our guide if you put it completely together is down four and volumes to up too.
And as we think about the back half of the year, we're pretty locked as we talked about on the call and our remarks on not only volumes, but are on promos that new business wins, and so really again, the only big variable is foot traffic and how that relates to volumes inside the stores and to the extent you think about <unk>.
It's really just math, we know the cost of the inventory were itself and we're pretty pretty good shape, where we stand today around our cost structure. So again just to make it real simple, it's really around volumes and what we see from a foot traffic perspective.
That's helpful. Thank you and then on the ransomware situation can you give us additional details on that just what happened and how the issue was resolved Doug I think you said it was completely wrapped up but then later I think you Might've mentioned there was some lingering effect I just wanted to make sure that that was behind.
And us.
Yes.
We basically had the incident, we immediately took the system down worked very closely with our customers and our people did a great job. The average down that folks have had with this type of thing.
Can range, 15% to 19 days and we were down for five days.
We were very cautious about it Dave because obviously, we wanted to protect that and our customer customers information and all but.
When I talked about the lingering the only thing that when you have a direct store model. The great news is at the shelf our fill rates have been extremely high as have our fill rates to the shell and so we didn't see any significant mess, but four days, we're chasing some stuff that we would have shipped in the.
Second quarter that will come in the third quarter and.
Our team did a great job on our customers were awesome because they basically said, it's not a matter of if it's when and what we really look for is how did you handle it.
And we felt great about the way we went in and got out of this thing.
But yes, it probably cost us some sales in the second quarter, and we will just be making those up our fill rates youll ticked down a couple points and we'll be back to the races by October one.
Okay. Thanks very much.
Thanks, Dave.
One moment for our next question.
Our next question comes from Lee Jagoda with CGS.
<unk> CJS securities.
Hey, good morning, guys.
Hey, Lauren.
Okay.
So I guess, starting with the self service key sales, increasing 19% just <unk>.
Given that we saw some softness in volume across the board is there anything going on there related to price or what do you think is driving the increase there.
My sense is that that people have gotten much more comfortable.
With may.
Making a key at a self serve and when you combine that with the <unk>.
Struggles that retailers have had with labor.
It's probably tougher than it used to be to get a key made I think it's really those two things. Our team has done a great job of making that gulli screen and that experience so much easier.
There is a bit of a slight bit of price in there, but it's really.
The consumer accepting that they can get in and get out and get what they want.
At that machine and that's probably the the reason that we've leaned into that machine in the consumers' comfort to now having that existing home and office and padlock availability now become as we get into 'twenty for automotive and RFID five so the good.
News is.
Consumers like it and the Great news for US is we're going to now be able to do even more from that machine, but but it's a bit of price, but its really just the consumer acceptance and our retailers know that theyre, not where they want to be on labor.
So that machine is even more important we've got retailers that thought they would want.
65, 70% coverage.
<unk> now going to a 100% because of the trend of the consumer and the fact that they don't see labor getting better anytime soon in the store.
So it's just.
So other than a little bit of price. It's just some cannibalization of the <unk>.
Full service going to the self service.
Right now it is and then think about the new options I think it'll be incremental growth because we're only doing auto keys for the most part in one retailer right now and it will extend that to four over time.
Got it.
<unk> I'd remind us as that shift occurs from manual to self service that is good from an economic perspective, not only for us but also for the retailer so we actually like that shift.
Sure No I understood and then in terms of the promotional.
Promotional activity in personal protective.
Fully appreciate the.
Sort of flattish for the full year ex COVID-19 sales on a year over year basis can you give us some more color on the cadence of promotional activity in the back half of the year and personal protective.
Yes, I think the way we would think about at least will be up year in the second half from promotional activity should be up double digits compared to the prior year, we don't give out that exact number and needless to say theres a little bit of.
It's not a science around less promotion versus what's in line versus maybe it's a new sale, but in general will be up 10% in the back half of over 10% in the back half on promotions in that business.
More specifically is it going to be more Q4 weighted or more Q3 weighted.
Slightly more Q3 weighted.
Got it I will hop back in queue. Thanks.
One moment for our next question.
Our next question comes from Michael Hoffman with Stifel. Your line is open.
Good morning, Thank you so much.
<unk> of sales data what are you interpreting as you think rieger and evaluate the point of sale data.
At each of your major vendors or customers I mean.
Michael and we went into the year you remember that.
Our big retailers, we're thinking that they would be up to on units.
And we felt like that was a bit aggressive based on what we've seen and so we had them in kind of flattish to down to in our minds on units.
And I think youre seeing with with the.
The big home improvement centers kind of saying down two to down five down two to down four on units in total so we're a little better than that and you look at the Hs in general being up four to five for the year.
Rocky how much prices up 4% to five for the year couple points for Asia.
Between two and 3% yes.
So that's what we thought would happen and it turns out to be that.
Now you can't the good news Michael we don't think there can we can't get anybody else on a plane. So we see.
Now, we're gonna be a little better off on footsteps, but it's about what we had thought and I think our numbers are playing out the way we thought on the HSN.
Okay and then.
Taking that a step further when you look at.
Hardware and protective.
You May have said this in your comments and if you did I apologize, but I missed it but but protective download volume, but hardware is flat, but inside hardware is the remodeling repair things like deck screws things like that actually up how do I think about inside the line of business.
Yes, if you look at the products that we sell inside Hs.
Youre definitely seeing deck screws and drywall screws as leading the pack. If you look at PFS, what youre seeing is and it kind of makes sense.
Consumer is leaning into a three pack or a value pack versus a glove for $14 99 and that would be the two things that we're seeing.
And in Hs.
Okay, great. Thanks.
Sure.
One moment for our next question.
Our next question comes from Reuben Garner with the benchmark company LLC. Your line is open.
Thank you and good morning, everybody.
Hey, Reuben.
Rocky can you talk about seasonality in margins in the part of the question I think it's the kind of.
Take a first look at next year, I know, you're not providing guidance, but with the second half kind of exiting at such a high rate how do we think about.
That fourth quarter margin number and how that plays out into next year.
Yes, I think.
We're in a little bit different world Ruben today than we've been historically and what I mean by that is we do typically see our second and third quarters are larger, particularly EBITDA margin.
Orders than the first and the fourth because of the volumes that we see obviously in the spring build and then.
Through the summer.
As we think about 2024, we're going to continue to benefit, particularly in the early half of the year from the nice expansion, we've seen in March and we don't expect that to drop.
Very significantly, but we have said is over time.
We deal with some of the biggest retailers in the world. So we would expect that we move back to our historic margin rate of 44% to 45.
I think we'll do a little better than that in the first half of 2024 and then the one thing that we are seeing now is some benefit from steel as Doug said in his prepared remarks that.
Flow through nine to 12 months from the time that we see that and so we would expect to see some of that that should continue to be a tailwind in the back half of 'twenty four but I think 24 is going to be a nice margin year and then again as you would think a couple of years out, we'll probably move back to that normal historic level of 44% to 45%, which we think is a fair margin for our business.
Got it and then business wins were mentioned a couple of plants.
Are the ones that you are starting to benefit from in the second half are those things that have been announced on previous quarters or their new win.
<unk>.
The past few months that you're talking about on today's call.
Those are ones that we've announced that are just ample main ones in PFS and one's in Hs.
Okay got it thanks, guys. Congrats on the results look good luck.
Thanks Ruben.
As a reminder to ask a question. Please press star one one on your telephone.
This concludes the Q&A portion of today's call I would like to turn the call back over to Mr. Cahill for some closing comments.
Thanks, everyone for joining us this morning, and I'd like to thank our customers and vendors as well as suppliers and importantly, our hard working team.
The contributions to the quarter and we look forward to updating you again in the near future. Thank you.
You may now disconnect.
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