Q2 2023 Gibraltar Industries Inc Earnings Call
Greetings and welcome to the Gibraltar Industries second quarter 2023 financial results call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Carolyn Pastille with L. P. J.
Please go ahead.
Thank you operator, good morning, everyone and thank you for joining US today with me on the call is Bill Busway, Gibraltar Industries', Chairman, President and Chief Executive Officer, and Tim Murphy, Gibraltar as Chief Financial Officer. The earnings press release that was issued this morning as well as a slide presentation that management will use during the call are both.
Available in the investors section of the wet company's website Gibraltar, one dot com.
Walters earnings press release and remarks contain non-GAAP financial measures tables, a reconciliation of GAAP to adjusted financial measures can be found in the earnings press release that was issued today.
Also as noted on slide two of the presentation. The earnings press release and slide presentation contain forward looking statements with respect to future financial results. These statements are not guarantees of future performance and the company's actual results may differ materially from the anticipated events performance or results expressed or implied by these forward looking statements.
<unk> advises you to read the risk factors detailed in our SEC filings, which can be accessed through the company's website now I'll turn it over to the turn the call over to bill by the way Bill.
Thank you Carolyn and good morning, everyone and thank you for joining today's call will start with an overview of our second quarter results.
Tim will then take you through our financial performance and I'll walk you through our 2023 outlook and then we'll open the call up for some questions. So let's start on.
On slide three titled Second quarter 2023 results.
We executed well in the quarter building on solid performance momentum, we created coming out of the first quarter, new bookings continue to improve and our backlog increased 15% sequentially and also turn positive versus prior year up 1% at the end of the quarter.
For the quarter on an adjusted basis operating income increased 18% EPS increased 23% and free cash flow reached 20% of net sales, we continue to improve execution across the business as we celebrate more 80, 20 and productivity initiatives improve our service levels launch new products manage our price cost.
<unk> and optimize working capital.
Our full year revenue plan for modest growth remains intact and as mentioned in our last earnings call assumes revenue increasing in the second half.
Our end markets have also evolved as expected and in general have solid momentum going into the second half and here is just the current situation for each end market segment, let me start with renewables.
Customer demand and project development activity continued to be strong industry is making steady progress with solar module importing through the U F. L. P E and we expect this to continue in the second half as well <unk>.
The industry is still requires more module manufacturers to demonstrate consistency and cause and success importing.
There are panels and a revenue plan assumes our customers will continue to see improvement with module supply.
Customers have also been recently dealing with the permitting and approval process. This seems to be mostly related to local government offices needing to ramp up capacity to support increasing project demand activity and we expect this to improve in the second half and beyond as well.
And our residential market channel inventory rebalanced as expected and demand started to improve a seasonality for the market returned and normalized and customers began their restocking process.
As anticipated end market demand has slowed significantly versus prior year, but remained positive in the quarter. We continue to see positive point of sale results for our products with end customers and expect this to continue.
On a macro basis, we expect the ongoing demand supply imbalance for housing single family and multifamily as well as interest rates and the current U S. Economic outlook to continue playing an important role in the strength of the residential market in 2023 and beyond.
Switching to AG Tech the order pipeline and quoting activity remains very active for the produce market as long standing commercial growers look to expand capacity to meet consumer demand for indoor grown produce growers are also focused on supporting increasing demand for additional varieties of fruits and vegetables, which tend to be developed and grown indoor as well.
We signed a large $30 million Proteus project in the quarter, which we will start designing and building in the second half.
There's $30 million project represents phase one of the overall project and it is the smaller of two phases.
Once completed we expect the second phase to begin shortly thereafter.
The produce market activity is currently offsetting a slower commercial market, particularly in the retail and car wash structures businesses.
We expect these businesses to start improving later in the year as customers have adjusted to the current interest rate environment and more clarity on their financing solutions and overall project returns and are seeing relatively positive end market demand.
Finally infrastructure the infrastructure investment and jobs Act continues to provide a strong tailwind for the market as well as good spending support visibility for state Dot's over the next three to four years.
There was strong demand for our expansion joined systems and structural bearing solutions used for bridge applications and compression joint sealants and coatings for payment applications.
You shouldn't expect end market demand to keep pace for the rest of 2023 and continue beyond this year.
So to summarize we delivered a strong second quarter and first half by executing our key initiatives and staying focused on delivering for our customers.
Given our performance to date, and our assumption and markets will evolve as expected we are raising our earnings guidance for the year, which we'll discuss in a few moments.
Now, let's turn to slide four and I'll give you an update on the solar module supply.
As I mentioned in solar panel supply is improving as more module suppliers gradually come up U F. L. P. A enforcement learning curve.
Digital panel suppliers beyond the tier one suppliers are now fully engaged with U S customs and border protection agency learning the necessary requirements and steps were consistent importation success. However, the industry needs to see more progress with this process to effectively support current and future demand in the U S market, we believe the flow of imported panels will improve.
Roof and be more consistent for our customers in the second half and generate positive momentum as we enter 2024.
As well the industry continues to watch for the Department of Commerce's final ruling on antidumping and countervailing duties, which is now expected sometime in August .
It is important to note that the D. O six preliminary ruling found four of the eight panel suppliers based in South East Asia, where not circumventing duties or dumping and these suppliers can continue to export to the U S without penalty.
Also module suppliers with non China wafer wafer supply are not subject to duty either.
Administration's executive order instructing the DSC to waive tariffs on all modules exported from southeast Asia for two years will continue through June 2024, and may be reevaluated at that time.
With that let me turn it over to Tim for a review of our financial results. Thanks, Bill and good morning, everyone.
I'll take you through our consolidated and segment results starting on slide five.
Adjusted net sales were flat at 364 million with organic.
Growth in residential and infrastructure and the acquisition of quality aluminum products offsetting slower sales and the renewables segments.
Overall sales were in line with expectations going into the quarter and our first half sales results are also consistent with full year sales plan.
Backlog at quarter end was $412 million up 1% versus the second quarter of 2022 and up 15% sequentially at the pace of business accelerated through the first half of the year as expected.
Adjusted operating income and adjusted EBITDA dollars increased 18% in the second quarter.
And EPS up 23%.
Margin improvement in the quarter was driven by strong execution price cost alignment in all segments.
Solid field operations implementation of additional 80, 20 initiatives, along with favorable business and product mix.
Weighted average shares outstanding decreased 6% for the second quarter of 2022 to 37 million shares in the second quarter of 2023.
I'll review our share repurchase program.
Now, let's review each segment starting on slide six the renewable segment.
The decline in sales was driven by scheduled changes, which impacted the timing of revenue recognition of active projects during the quarter.
Schedule changes were mainly related to module supply and local permitting delays.
Permitting process is expected to improve as local government offices ramp capacity to meet increasing demand.
The pace of new order in contracting activity continued to accelerate and new bookings more than doubled in the quarter.
As a result backlog increased 17% sequentially and is up 6% year over year.
As a reminder, our backlog consists only of signed contracts with deposits not include purchase service without a signed contract and deposit Msas without specific work orders are verbal agreements with customers in our new bookings or backlog.
Segment profitability improved adjusted operating and EBITDA margins of 11, 7% and 14, 8%, respectively, increasing 470, and 550 basis points versus prior year.
The team executed well across the business improving supply chain material cost reduction field operations and price cost alignment.
Sequential margin improved 700 9700 basis points respectively.
We expect to deliver improved sales and margin performance in the second half of the year, assuming module supply and improve further permitting process capacity continues to accelerate.
Let's move to slide seven to review our residential segment.
Segment sales increased 14% versus prior year with organic contributing over 1% and the acquisition of quality on the products, providing the remainder.
Organic growth was driven by participation games across the business the contributions for new customers.
More than offset the impact of prior quarter's market price adjustments in response to the decrease in commodity prices.
And summer remaining channel inventory right sized.
Quality aluminum products performance delivered to our expectations.
The residential end markets have returned to normal seasonality or building expected volumes in the second and third quarters.
Channel inventory Destocking appears to be complete and demand remained solid and our end markets. We continue to see opportunities to successfully gained additional market participation in 2023 as we have in recent years.
Adjusted operating and EBITDA margins of 19, three and 25%, respectively expanded 80 and 90 basis points.
Improved from last year.
Possibly better along we implemented additional 80 20 initiatives.
Client mix is favorable.
We expect these items to drive continued strength in segment margins in the second half of the year.
These market performance was in line with expectations and continues to improve profitability towards where all three levels as the integration proceeds.
Additionally, after quarter end, we completed the acquisition of a small $8 $5 million revenue, Utah based building accessories manufacturing distributor.
For $10 $4 million, a little less than six times 2022 EBITDA.
This business will improve our market coverage and service levels in the mountain West region reduce logistics costs supporting the region and utilize an asset light operating model, which we may also deployed to drive participation and other adjacent markets.
We also to continue to invest in and implement a common ERP system for the residential segment.
And system will provide.
Operating efficiency speed, and agility and scalability for more profitable growth.
Let's move to slide eight with the Org Tech segment.
Adjusted net sales decreased 16, 1% as the commercial business experienced some customer delays in project starts.
New orders in the produce business helped increase backlog of $16, 2% sequentially, which is expected to drive improving sales in the second half of 2023.
The project pipeline and quoting activity in this business remains robust.
Segment, adjusted operating and EBITDA margins of nine 5% at 12, 9%, respectively. An improvement of 280, and 350 basis points driven by 80, 20 actions supply chain optimization initiatives and improvements in project management system.
We continue to expect margins to strengthen as volume.
Yeah. So the processing equipment business resulted in a GAAP operating loss in this segment during the quarter and the liquidation is essentially complete with only nominal cost for me.
Let's move to slide nine to review our infrastructure segment.
Segment sales increased 12, 6% driven by strong demand participation games.
Positive impact of the infrastructure investment and jobs Act.
Momentum on orders continues with backlog, increasing 46% year over year state departments of transportation access federal funding and strong demand persisting, both fabricated and non driver product lines.
This business performed very well during the first half of the year. We expect continued strength for the remainder of the year.
Segment, adjusted operating income doubled and adjusted operating and EBITDA margins of 24, 1% and 27, 6% respectively.
<unk> 1070, and 1030 basis points, driven by execution, 80, 20 productivity supply chain efficiency and product line mix.
This team is executing very well, we expect continued strength in profitability for the remainder of the year.
Let's move to slide 10 to discuss our balance sheet and cash flow.
At June 30, we had $384 million available on our revolver and cash on hand of $19 million during the quarter, we generated $76 million in cash from operations through a combination of margin improvement from $33 million generated from reductions in working capital.
We collected cash from inventory reductions and benefited from increases in accounts payable purchase activity normalize and other liabilities as project related deposits and billings accelerated with accounts receivable rising on increased sales.
As a result, our free cash flow generation during the second quarter was an exceptionally strong 40% of sales.
Free cash flow in the first half of the year benefited from an approximately $40 million reduction in our investment in working capital.
While we expect continued contribution of cash flow from margin expansion the impact of working capital improvements is not expected to be significant in the second half of the year.
We used cash generated along with cash on hand to pay down 40 million on our revolver during the quarter and at quarter end, we had 12 million outstanding on our revolver and that Leverages zero.
As I mentioned earlier at the beginning of July we invested approximately $10 million and taught baseball and accessories business.
Given our results to date, we're confident we can drive continued strength in our operating cash generation on stronger profitability in 2023 with careful working capital management, we continue to target free cash flow in excess of 10% of sales from here.
We continue to expect us generating cash flow to repay outstanding borrowings fund investments in organic and inorganic growth along with our opportunistic stock repurchases.
Supplemented as needed by the use of our revolver, depending on the timing of any M&A or repurchase.
Let's move to slide 11 to update you on our share repurchase program.
During the second quarter, we repurchased approximately 368000 shares with a market value of $17 8 million for an average price of $48 42.
Funded this repurchase through operating cash flow for.
On the inception of the buyback to the end of the second quarter, we expended approximately 56% of our 200 million authorization.
And at quarter end, we had 34 million shares outstanding with the weighted average shares outstanding of $30 7 million during the second quarter now I'll turn the call back to Doug.
Thanks, Tim let's move to slide 12 to review, our 2023 strategy and priorities.
The mid point of this of the year.
We have better clarity in regards to our end markets I think we're executing a relatively well and we are confident in raising our outlook for 2023.
Our priorities and focus are unchanged and we will continue with our five key initiatives first drive growth quality of earnings and margin improvement and strong cash performance secondly, execute 80, 20 initiatives and accelerate our participation initiatives.
Third stay the course with our investments in our digital transformation fourth continue to strengthen the organization and experienced and competency and also continue to optimize operating structure.
And fifth conduct business in the right and responsible way with discipline and focus.
Now, let's move to slide 13 to review, our revised 2023 guidance.
Given our first half results and current outlook for our end markets, we expect to deliver a strong second half of the year and as a result, we are increasing our full year guidance as follows consolidated net sales will range between 1.3 dollars 6 billion to 1.41 billion compared to 1.38 billion. In 2022. This is unchanged from our prior outlook.
GAAP operating margin will expand to between 11, 1% and 11, 3% up approximately 12% versus prior guide and adjusted operating margin expansion will range between 12, 3% and 12, 5% up approximately 11% versus prior guidance.
GAAP EPS will range between $3 46 and $3.66 up.
13% versus prior guide and adjusted EPS will range between $3 90, and $4.10 up approximately 12% versus prior guide free.
Free cash flow as a percent of net sales.
We will remain in excess of 10% compared to 6% in 2022.
We delivered a relatively strong first half and we look forward to a good second half as well our team is focused on the things that matter, most and coupled with ongoing execution and 80 20 momentum. We are confident we will continue to deliver positive results.
Finally, I am grateful to everyone on the Gibraltar team for the progress that we've made and also the opportunities we've identified going forward.
Now, let's open the call up and we will take your questions.
Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.
Before pressing the star keys.
Our first question.
Comes from the line of Dan Moore with CJS Securities. Please proceed with your question.
Hi, Good morning, it's Pete Lukas for Dan Congratulations on a great quarter, just wanted to start with residential you touched on it in your prepared remarks talking about volumes, improving and margins improving in the second half just I guess in terms of remodel and repair how is that holding up more broadly and what are your expectations for.
Our continued participation gains over the next 12 to 24 months kind of how do you think about that and also you mentioned M&A in the space. How do you think about that going forward.
Ah Okay, Pete let me break that down a little bit so.
You know first and foremost.
The industry has gone through this.
This change getting back to seasonality so that that is playing out like we thought so Q2, and Q3 is back to the highest quarters and so the volume.
As increasing commensurate with that I think the other thing that was interesting. When you started here you know rumblings of recession back last year, a lot of folks in the industry started to.
Slow down and in short balance sheets, and probably overcorrected relative to what end market demand was really doing and so we started to see a little bit of that restocking come back into play as we got into the season as well. So I think that's going to continue carrying forward both of those as we move into the rest of the year and you know in the front of us.
Yeah, when you think about remodel repair we're really more repair.
As opposed to less on the remodel piece with what we do in residential and and you know that's been relatively steady from our point of sale.
<unk> results, where we see every week what are our products are selling out 10 customers that really has stayed positive. It came down as I mentioned in our remarks significant versus the previous year as the industry shifted down and.
And you had a couple of headwinds with market pricing coming down but in general the demand has stayed relatively solid in and we expect that to continue going forward.
This year and as it relates to participation gains, it's just something that we've employed as a strategy last four years.
Just trying to increase our service levels and be agile and responsive to our customers expand into some geographies that we traditionally haven't been.
And as well as invest in resources, where we didn't have presence and as a result, it's just continue to chip away and and those opportunities continue to present themselves and as they do we're trying to act swiftly in and do that supplier of choice. So we still feel really good about the opportunities in front of us.
And our participation front.
Oh, Thanks, and then shifting to AG Tech you kind of touched on it you did touch on it in the prepared remarks, and I'm, sorry, if I missed some of it here.
But in terms of when would you expect at our recent growth in the pipeline and backlog to translate into faster growth just over the next you know call. It a 12 to 12 months I know you talked about improving sales in the second half and some projects coming on and then in terms of the first space, but.
How do we think about that.
Yeah. So the project I referenced in the remarks that we just signed we'll actually start generating revenue.
And the third.
And the third and into the fourth quarter and carry into next year and it really depends on the size of these project. This is a relatively large one so.
Once they are signed they tend to to start having an impact for us relatively soon typically the next quarter or so as as things ramp up so yeah.
I think as the backlog continues to build you'll start seeing more of a steady stream of growth come from that backlog on a consistent basis in subsequent quarters that are in front of us.
And last one for me on renewables, our margins have historically been quite lumpy what are the keys to driving margin expansion.
Going forward is it at the module supply or how do we kind of think about that.
Yeah, you know I think the industry has been really lumpy the last two and a half years with all these trade issues that we've been dealing with I think as some of this settles in to a consistent pattern. It gives everybody a chance to.
Operating a much more consistent way in.
From our perspective as the volume gets a little bit more predictable that's always helpful. But we're really where we've been focused.
As you know trying to.
Find ways to improve and challenge from the paradigms around how we've traditionally operated the business and I think that's what's paying off for US now so for us to generate.
EBITDA margins close to 15% on down volume gives you some indication of some of the operating performance changes that we've been able to make and so we don't Wanna be volume dependent obviously on margins, we like that to be incremental.
As the volume comes back so.
I think as this panel supply becomes a little more consistent that's really the thing that matters, most that'll help us be more consistent as well and continuing to grow our margins. The permitting process. We mentioned is really more we think related to just the increasing demand that's come back online for a lot of local government.
Officers now has created a backlog of permits that have to be flushed through the system. After a two year somewhat of a hiatus of much slower demand. So it's just flexing that muscle building that muscle again, but it's not a structural issue per se as much as it is just ramping back up.
Yeah.
Extremely helpful. Thanks, I'll jump back in the queue.
Thank you.
Thank you. Our next question comes from the line of Alex had been with Sidoti and company. Please proceed with your question.
Thank you this is Alex on for Julio Romero.
Morning, and congrats on a nice quarter.
So my first question is yes.
Yes of course, my first question is on renewables.
Could you speak to the pace of activity in bookings you saw during the quarter and what was that trending upward as you ended the quarter.
Yeah. Good question. So if you recall from our last quarter, our bookings coming out in Q1 were.
Substantially better than we thought they would be going into the quarter. So we were up sequentially almost 100%.
And I'm getting close to getting our bookings and backlog ahead of actual last year in the second quarter, we are up off of that strong quarter up another 17%.
With our sequential bookings and that actually put us over the top in a year over year basis, which was from our perspective really positive because its I think what it is demonstrated as maybe the industry has kind of hit that bottom and now starting to recover an hour in the second quarter to where you start to see year over year.
Backlog and therefore, I think that'll translate into growth getting back on plan for the industry as well as for our business, So and we see that momentum carrying into the third quarter as well.
Yeah.
Very helpful. Thank you.
I have two more questions on the second on residential.
Could you talk about where we are in terms of price costs would you say, that's complete or close to complete.
Yeah, I think it is I know we had said.
Gosh dating back to Q3 of last year that Q4, and Q1 of this year would be correction quarters for the industry is.
Commodity prices came down swiftly and there was a lot of inventory on hand for everybody in the industry because of supply chain.
Challenges the previous two years and it's taken a it would take about two quarters for that inventory to flush itself out and therefore a price a.
New pricing to be aligned with better input costs and I think.
We've done a good job managing that in and we said we would flip the tied in in Q2, and we would generate better margins year over year in Q2, and that's kind of what happened and yes, I wouldn't say, it's 100%, but where we've done a good job of.
Is getting ourselves in a much better position.
In Q2, and leading into the rest of the year and onwards. So.
A lot of hard work.
But the team has done a great job getting us in this position.
Yeah.
Got it thank you for the context there.
And last question for me is on infrastructure.
You know the margin that you posted there was it was pretty impressive and in the press release, you noted execution 80, 20 productivity supply chain and product mix as being the main drivers Hum could you help rank those or kind of help us understand which you know is the most significant.
To get there.
Yeah.
Honestly, it's it's really relatively equivalent across the board and it's not something new per se. The team has been making progress.
On the margin front and the growth front really over the last three years and the Bill has really we said last year that the bill will start to be impactful towards the end of 'twenty two.
And help us start accelerating into 2023 which has really been the case are on the top line, which as you know we're pleased with.
With our backlog, increasing significantly et cetera, but really the margin story has been a combination of 80 20, it's done a lot of work on product line simplification customer line customer simplification and we've made investments in our some of our processes and equipment. I think has just made us much more productive and lower our cost.
And then on top of that.
We've had as we've broken into some some new opportunities, we've been able to mix to higher margin products.
And top of making those products higher margin through all 80, 20 work and productivity initiatives. So it really has been a a a.
A multifaceted front towards.
Getting the business, where it is today and it's really been a journey of the last three years. So I wouldn't say it was anything unique those four or five items in the quarter I would say, it's pretty consistent with the work that's been going on for some time.
Yeah.
Okay. Thank you and one quick follow up how do you expect that margin to trend into the third and fourth quarters.
Well.
Yeah.
For the you know the business has performed well I think like.
Like some of our other businesses, you'll see some some differences as we get into the later parts of the year.
There's a little bit of seasonality there, but you know we continue to expect to see management expects to see strong margin performance.
Yeah.
Thank you yeah. Thank you very much for all the context very helpful.
Okay. Good.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Walter Liptak with Seaport Global Securities. Please proceed with your question.
Hey, guys good morning, and nice work on the margins congratulations.
Thanks, well very well.
Good morning.
So that last question, which segment, where you guys are referring to I missed that infrastructure.
Infrastructure.
It's a combination of all.
That's been driving this.
Yes.
Journey of margin improvement and in this case growth as well.
Yeah, that's great. Okay. Yeah, so maybe in a similar way renewables with the margin improvement are these sustainable you think in the back half of the year with a better kind of fundamental you know.
Yeah, Yeah, I think no.
Okay, Yeah, and I would encourage Evan referenced Q3, and Q4 of last year on down volume. We ran margins very similar to what we just posted in the second quarter actually maybe a little bit stronger. So you know as the volume returns and it starts to be more consistent I think we should expect.
These margins to continue and improve as well.
Okay Alright, great.
And maybe just a couple of follow ups here.
The U I thought I heard you say that you're going to do an ERP system in.
<unk>.
Yeah, well, we actually started on that journey or ago. So.
Just for context.
Four years ago, we started this journey with our renewables business as we integrated across the businesses, we got to a single ERP.
Business than we did the same thing for AG Tech business and then we started a year ago with our residential business. So.
We got our first one in a year ago, we're in the process of putting our second one in and then we will.
Hopefully get the group finished up by the end of next year.
So each of our large site and then our infrastructure has already been on a common system for some time. So we will have all four of our segments operating an.
ERP systems that our latest and greatest and well in the case, where we have multiple locations get everybody on the same operating system. So.
That's the journey, we've been on now for four years.
Okay, Great I don't remember that there's any disruption. So you guys must be good at it.
Yeah, where we've been pretty been walking yeah, I must say slow walking.
This requires a lot of change management involves a lot of people obviously in effectively what youre doing is mapping every process and every.
Piece of data flow, you can think of and that impacts your business from quote to cash and so you know it takes time to get that right. If you get that right. Then the implementation when you turn a switch on inherently is much.
Much easier and much more effective so yeah, we're walking through the process trying not to be disruptive.
And frankly, we're trying to do all of this in the middle of the pretty chaotic macro environment. The last four years, but for US. We thought it was really critical for us to be able to scale and to get to the next level of performance to have the systems in place. So.
It's really been a necessary investment over the last four years and will continue to drive that.
This foundation by the way that we just talked about will allow us to get to the next level. When you start thinking about an old throw AI because everyone wants to talk about it but the fundamentals.
That's how he takes system integration and engage your business going forward I think we'll be in a much better position to do that then we would've been otherwise.
Okay, Great and then maybe the last one for me is.
I Wonder if you could just give us some more details about the deal that you got in AG Tech.
I think you said it was $40 million and it was relatively small and it sounds like a pretty big deal to me.
I wonder if it.
You know how much fingers the phase two portion to it and.
Is this something where you can grow keep growing with that customer.
And how should we think about future orders.
This is our one of our longstanding customers to start with so theyre expanding.
Adding capacity around this particular product that theyre growing which they've been growing and other facilities that we built for them in the past. So as that demand continues from you know think about all that.
Demand for produce in your supermarket space. This is where a lot of that is.
Packaging and consumers.
So typically a lot of this can be a large site and when it's all said and done it's I don't know the exact number of acres, but it's it's a 50 plus acres under roof.
Growing.
Different types of fruits and vegetables. So.
Projects tend to be done in phases, so you'll you'll do the civil for the entire thing you'll do this you do the first phase and then you'll do the second phase the second phase in this case is actually a little bit bigger than the first and as we get done with the first phase that second one will come in to a final design in and then we will get moving on that and that.
You know it should be very helpful going into next year.
Depending on the.
The completion of the first phase and when that gets done but it tends to be a little over a little bit overlap between when you're finished.
Oh, great Phase and you signed the contract for the you know the.
Next phase that comes with it.
And Thats.
I would say it's typical in a sense when you have a multi phased project that's how it works but not.
Not every project is multi phased it depends on the size that you have the water rights that you secured the you know.
Bunch of permitting things that go with it. So in this case, it's it's gonna be a relatively large production facility.
That'll be done in between the end of next year.
Okay, Alright I appreciate it. Thank you good luck with the second half.
Thanks.
Yeah.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Baldwin for any final comments.
Well I want to thank everyone again for joining us today are coming up we expect to present at the Seaport Global Summer Conference in August and the Sidoti Fall Conference in September as well as a number of other marketing activities and look forward to updating you on our progress when we report our third quarter results as well. So thank you and have a great day.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.