Q3 2023 Gibraltar Industries Inc Earnings Call
[music].
Greetings and welcome to the Gibraltar Industries third quarter 2023 financial results conference call at.
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A brief question and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Carolyn capacity over time.
Hey, Thank you you may begin.
Thanks, Christine good morning, everyone and thank you for joining us today with me on the call is Bill Baas way, Gibraltar Industries', Chairman, President and Chief Executive Officer, and Tim Murphy, Gibraltar as Chief Financial Officer. The 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 U S.
That's your section of the company's website Gibraltar ones out.
If all sorts of 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 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 also be accessed through the company's website.
Now I'll turn the call over to Bill Bosley Hill.
Thanks, Carolyn and good morning, everyone and thank you for joining today's call will start with an overview of the third quarter results and Tim is going to take you through our financial performance and then I'll walk you through our updated 2023 outlook. Then we will open the call for your questions. So let's start by turning to slide three.
Idled, our third quarter results.
Third quarter 2023 results sorry.
Our focus on driving quality of earnings in 2023 continues to pay off.
In our delivery of higher profitability and strong cash flow generation, we executed well in the quarter continuing our momentum from the first half of the year. We continued to experience solid end market demand. We also expanded our market participation, particularly across our residential and infrastructure businesses and both are right renewables in AG Tech businesses, we did experienced some delays in <unk>.
Art page, it's contracted inactive projects and those projects have since begun are shifted to either the fourth quarter or into early 2024.
As well during the quarter on an adjusted basis, we increased operating income 19%.
P S, 23% and free cash flow increased to 23% of net sales.
Continue to accelerate our 80 20 initiatives across product lines and operations and also optimize our supply chain management with market price actions.
Improvement in operating margin and working capital continue to drive solid solid cash generation performance.
It all a result.
Yeah.
Okay.
Ruth.
Yes.
We expect our momentum to continue in the fourth quarter to support strong full year performance in 2023.
As a result, we are changing our guidance for 2023, we are narrowing our net sales outlook and raising our outlook for both profitability and EPS, which we will review shortly.
Now, let's turn to slide four for an update on the solar market.
Our demand pipeline of renewables is very active and bookings continue to grow as the industry continues to navigate through three basic issues module supply.
Permitting delays and.
And clarity on the final rules governing IRA tax benefits.
First let's start with module supply it is improving as additional module suppliers are having more consistent success importing into the U S. L. P. A process and this is encouraging.
And yet we need to see additional progress as we close out 2023 and move into 2024.
Also related to module supply the department of Commerce issued its final ruling in August and it's 80 CVD investigation.
The D O see final report indicated three of the eight module suppliers are found not to be circumventing and as a result are able to export to the U S without duty.
The report also confirmed that module suppliers using non China wafer supply are also not subject to duty the.
<unk> also implemented the administration's tariff waiver, which is in effect until early 2024 and may be reevaluated at that time.
Because of the administration's waiver the Doj investigation results are a little less concerning relative to the U S. L. P. A importation process.
Secondly, delays in obtaining permits for projects.
Remains an issue although customers find permitting a challenge in the near term. We are confident this situation will continue to improve as local government agencies ramp capacity to improve the approval process for for a permit applications.
And finally customers are anxiously awaiting final guidelines from the department of Treasury on how to secure additional tax incentives and inflation are not under the inflation reduction Act tax.
Tax credits directly affect project economics, and returns and we are seeing some customers with projects in process pause indoor defer additional projects until they had a clear understanding of how to realized incremental tax benefits.
We expect the industry to work through these challenges and as they ease or improve our customers will be in a better position to execute current demand.
Properly plan to support robust demand pipeline is expected going forward.
With that I'll turn it over to Tim for a review of our results.
Thanks, Bill and good morning, everyone I'll take you through our consolidated and segment results starting on slide five.
Adjusted third quarter sales were flat at $390 million.
Timing shifts of the active projects in renewables nightclub business as well as price management initiatives and the residential business, where possibly offset by revenue from recent acquisitions and market participation games across the business.
Backlog at quarter end was $375 million up approximately 5% versus the third quarter of 2022.
Demand in order flow remains strong heading into the fourth quarter.
Adjusted operating income and adjusted EBITDA dollars increased 19% and 18% respectively in the third quarter with adjusted EPS up 23%.
Margin improvement quarter was driven by solid execution additional 80 20 initiatives.
Good activity and price cost management.
Weighted average shares outstanding decreased three 4% from the third quarter of 2022 to 37 million shares in the third quarter of 2023.
And there were no share repurchases in the quarter.
Now, let's review each segment, starting with slide six the renewable segment.
Segment net sales decreased four 2% as customers start dates are contracting and active projects were impacted by delays in both local permitting and final inflation reduction Act tax credit guidelines.
The rate of decline is slowing compared to prior quarters as module availability continues to improve as the module importers climb up the U F. L. P. A unfortunate learning curve.
Bookings of new orders remain robust with year over year backlog growing 13, 3%.
And as Bill mentioned, some customers are waiting to sign contracts until department of Treasury issues, I or a tax credit guidance, our pipeline remains really strong.
As a reminder, our backlog consists only of signed contracts with deposits. We do not include purchase orders without a signed contract and deposit.
S as without specific work orders are verbal agreements with customers in our new bookings or backlog.
Segment profitability again improved with adjusted operating and EBITDA margins of 16, 7% and 18, 9%, respectively, increasing 380, and 390 basis points from last year.
Our team executed well with supply chain productivity field operations efficiency and solid price cost management.
Assuming industry dynamics remain constant with improving module importation and continued delays in local permitting we expect relatively flat sales in the fourth quarter with net sales in the second half accelerating from the first half.
Let's move to slide seven to review our residential segment.
Yeah.
Segment sales increased five 6% from last year recent acquisitions added eight 8% growth in organic sales decreased three 2%.
Driven by prior quarter price adjustments in response to decreasing commodity prices and 80 20 initiatives, we took to phase out less attractive product lines.
So I wish built according to normal seasonality in the third quarter, and we benefited from increased participation with new and existing customers and.
From having expanded into new regions.
Both of our recent acquisitions are performing to our expectations.
Demand remains at normal levels in the fourth quarter with the expectation of normal seasonal inventory reductions at our customers and we expect to continue to grow participation.
Yeah.
Adjusted operating and EBITDA margin of 18, 8% and 22%, respectively expanded 200, and 220 basis points through increased volume improved price cost alignment implementation of additional 80, 20 initiatives and favorable product line mix.
While the aluminum products margin performance continues to improve towards Gibraltar levels as the integration continues.
We expect continued year over year margin improvement in the fourth quarter through improved price management, increasing participation gains mix and the contribution of the two acquisitions, we made over the past year.
Yeah.
Let's move to slide eight to review our AG Tech segment.
Adjusted net sales decreased 26% as new product construction starts were delayed in the quarter.
We began a large a large project, which continued to drive improving results beginning in September.
Orders continued to accelerate in the quarter driving backlog up nine 4% sequentially.
On a year over year basis backlog decreased as a few customers worked through project Redesigns.
We expect increasing activity to drive revenue acceleration in the fourth quarter.
Segment, adjusted operating and EBITDA margins of five 6% and eight 1%, respectively decreased 510, and 540 basis points on lower volume as the timing of net sales shifted into the fourth quarter from the third quarter.
Margins improved in September with project starts and are continuing into the fourth quarter, we expect volumes for new project execution underway to drive improved results in the fourth quarter.
Okay.
Let's move to slide nine to review our infrastructure segment.
Segment sales increased 22, 5% driven by solid end market demand and market participation games.
Backlog increased six 2% year over year.
Market activity remains strong, including from commercial customers and airports and the infrastructure Bill continues to provide strong tailwind.
Our momentum continues into the fourth quarter, we expect to leverage these strong trends by increasing market participation through the remainder of the year.
Segment, adjusted operating income increased 146% and adjusted operating and EBITDA margins of 25, 6% and 29, 1%, respectively improved 1300, 230 basis points driven by strong execution price cost alignment 80 20 initiatives.
Additional productivity investments supply chain efficiency and product line mix in.
Infrastructure team continues to execute very well and we expect to report a strong year of growth and expanding profitability for this segment.
Yeah.
Let's move to slide 10 to discuss our balance sheet and cash flow.
At September 30th we had cash on hand of $86 million and 396 million available on our revolver.
During the quarter, we generated $93 million of cash from operations through a combination of margin improvement and 43 million generated from reductions in working capital.
We collected cash from accounts receivable and inventory reductions and benefited from increases in accounts payable and other liabilities.
Inventory is getting closer to normal levels as in stock positions on supply come into balance.
As a result, our free cash flow generation during the third quarter was again exceptionally strong at 23% of sales.
Free cash flow in the nine months of the year benefited from approximately $84 million a reduction in investment in working capital versus the prior two years impact from the increased working capital investments, we manage through the pandemic are supply chain challenges.
We expect strong cash flow for the remainder of the year.
There were no share repurchases in the quarter and we paid down the outstanding balance on our revolver. Therefore, we ended the quarter with an unlevered balance sheet.
We'll continue to focus on will continue to focus our capital allocation on organic growth selective high quality, M&A and opportunistically returning value to shareholders through our share repurchase program.
These vessels will be funded through generated cash and supplemented as needed by use of our revolver, depending on the timing of any M&A or repurchase.
Now I'll turn the call back to Bill Thanks, Tim Let's move to slide 11 to review our 2023 strategy.
And priorities are focused on five basic initiatives is driving solid performance and we will continue to do so as we finished 2023 first focus on driving growth quality of earnings and margin improvement and strong cost performance secondly.
Continue to execute 80, 20 initiatives when more participation and drive service levels higher.
<unk> stayed the course with investments in our digital transformation to help scale, our businesses with both speed and agility.
Fourth strengthening our organization with the addition of experienced and competency in a structure that drives more focused scalability and accountability.
And fifth conduct business in the right and responsible way every day.
Now, let's turn to slide 12, and review our revised 2023 guidance given our results to date momentum heading into the fourth quarter. We are adjusting our guidance as follows.
We're narrowing our consolidated net sales range to between $1 37 billion and $1 4 billion compared to $1 3 billion in 2022.
We expect GAAP operating margin to be between 11, 2% and 11, 4% compared to nine 4% in 2022 and.
And adjusted operating margin to be between 12, 6% and 12, 7% compared to 10, 9% in 2022.
We expect GAAP EPS to be between $3 51, and $3.71 compared to $2 56 in 2022.
And adjusted EPS to be between $4, five and $4 15 compared to $3 40.
In 2022.
And finally, we expect free cash flow to exceed 14% of sales for the year. This compares to 6% in 2022, driven by higher margins and working capital performance.
We expect to execute well in the fourth quarter.
And are relatively well positioned going into 2024, our team continues to execute remained focus is.
Theres really excited for what we do and how we do it and they deserve all the credit for our results.
And the team is also very proud, we're able to raise our profitability and EPS guidance for the second time. This year. So a big thank you to our team and we look forward to delivering a strong finish to a good year now lets open the call and will take your questions.
Thank you we will now be conducting a question and answer session.
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Okay.
Thank you. Our first question comes from the line of Dan Moore with CJS Securities. Please proceed with your question.
Thank you good morning.
Bill Good morning, Tim.
And congrats on another really solid quarter, maybe start with the resi as we kind of look beyond Q4 are you seeing any change in tone in the overall market up or down and in second and how your performance in participation gains obviously very impressive year to date, how do we think about that going forward does it creek tough comps or Conversely.
You know as that momentum you've created kind of easier to continue to drive participation and share gains. Thanks.
Yes, so Dan we havent really seen a major shift.
As you know we've talked in the past the weed.
We get visibility for the out sales.
From our big box retailers in particular.
I think we.
We continue to see the growth that we've been seeing all year no. It's everything is adjusted obviously for the seasonality it's back in the marketplace.
So we feel like Theres, a relatively solid continuation of what we've been seeing going forward as it relates to participation. That's a combination of working with existing customers and.
Getting a little bit bigger piece of the pie and some things that we're in today. It's also.
The other big push there is picking up new customers that we traditionally haven't had as much.
And I think we're hitting both of those pretty well and I think that will carry us into 2024 with some decent momentum. So like I said, we're on a solid footing I think entering the year. We're in the middle of putting our plans together as we speak and faithful to get the teams. All next week to get our first really hard look at 'twenty 'twenty four but you know from a resin.
<unk> perspective, we feel pretty solid about going into next year.
And similar question and maybe a little bit more focus on the margin on AG Tech you know maybe talk about Tim the the opportunities you have and the cadence for continuing to improve margins as we look out you know and maybe kind of your expectations in terms of timeframe.
And getting back to those.
More low double digit low teens margins that we've seen previously.
Yeah. So we we had a project that we thought was going to start pretty much at the beginning of the second quarter and it got delayed a few months.
So.
I'm, sorry, beginning of the third quarter and so it got delayed if he wants to start up in September running.
Running as expected.
So we know headed into the fourth quarter, we've got more normalized volume.
And so you should see margins begin to recover.
And then.
There's a lot of stuff in the pipeline.
That we're pretty excited about.
Not in hand, yet, though so hard to say.
We'll know more.
Over the course of the next few months.
For our plants.
But they are on our plan.
We don't really have fourth quarter next year in front of us, but in general our expectation is always grow top line expand margins.
That would be my expectation.
Each of the business every year.
Helpful and you know given the obviously strong friction free cash flow and liquidity position, maybe just talk about your priorities for capital allocation you know over the next several quarters and specifically in this market are you seeing more opportunities in the M&A funnel. Thanks again for the color.
Yeah.
Sure.
I think that.
Maybe the M&A funnel will begin to open up a little bit more although.
We made acquisitions, we made two in the last sort of for 14 months from here. So.
But I think yes, it's active were always pretty active in that space and we're really selective.
So there's a combination of.
Things that are available things it makes sense for us, but I think we'll continue to focus there certainly.
You know when we can invest in safety and productivity internally, although that's not a huge use of capital.
I don't see any real change to that and then.
You know the share repurchase program wins.
Appropriately used there.
I also remind everyone rate this year as.
We're outperforming on free cash flow sort of making up and I've tried to be very clear at that are a part of it is making up for that big investment in working capital we had to make in.
'twenty, one and 'twenty two as we dealt with that supply chain.
I think I said 84 million of our cash flow.
Which really.
Putting the investments that we've made in working capital out.
Yeah.
But our margins much better than it was a year ago and so that's going to obviously increase our cash.
Hello.
Very good. Thank you again I'll jump back with any follow ups.
As a reminder, if you would like to ask a question press star one on your telephone keypad.
Our next question comes from the line of Walt Liptak with Seaport Global. Please proceed with your question.
Hey, good morning, guys.
Good quarter.
Yeah.
One.
Of the the renewable segment you called out you know number of different issues I Wonder if you could do those in rank order.
And if any of them got worse or if they if they are all getting better.
How things change during the quarter like I said.
The permitting delays you know you guys talked about that last quarter, you know I don't know.
You know how long that takes her or.
Oh, how long, we'll be talking about that as an issue, but I wonder if you can go through and rank and then you know if things got better and worse.
Yeah.
Say the.
Sorry, excuse me the panel supply.
Module supply.
Still a little bit of a challenge, but it's getting better literally month to month.
So we continue to see progress and we've seen that all year and I think the thing.
Think about our businesses.
You you don't really sign contracts. If you will if you have if you don't have a panel. So the fact that our backlog continues to grow I think customers are getting more confident they can get their hands on panels and that's just a function of the <unk>.
Oh manufacturers, having more consistent success getting getting things through <unk> a process. So that's getting better.
Permitting I think it's holding.
With kind of where we said the last quarter, it's still an issue and it's really.
Down to the individual projects so it's hard to to tell you.
Yeah.
Okay.
Okay.
Hello.
Hello.
Okay.
Are they feel like it's.
Near term issue.
Okay.
They are selling.
Yes.
Okay.
So those will start to free up is I think put out a few of these.
Government offices behind that.
Eight ball trying to catch up and that's that's what we hear from our customers.
And they're working it every day and it's frustrating for them. So I would say that that's probably similar to what we saw last quarter.
But that's probably the number one thing right now so number one would be that.
Whats crept into the equation is the third item, which is the IRA.
Incremental.
Tax benefits or the additional tax benefits that you can get from the IRA.
And that's really department of Treasury finalizing the rules and so what's really clear today as.
Prior to that or a you had a certain investment tax credits.
Yeah.
Okay.
Level, you have to do a couple of things and that's very clear that's prevailing wage and apprenticeship program and people are moving in that direction.
That allows you to maintain your tax credits to get the incremental ones above that that's when you start getting into a couple of other things.
Like local manufacturer Maiden America, et cetera, and where I think the industry is still waiting for the final rules.
Actually what that means and how to keep score and all that good stuff from treasury and that'll give you the extra benefits on top.
Yeah.
Okay.
And I thought Treasury, I think treasury, even thought we'd be out sooner.
That's probably coming.
Late this year early.
In Q1 as the latest we've heard from the industry. So.
Number one is permitting.
The incremental tax credit opportunity just being delayed.
Number three is a module supply that's how I would rank them today.
Okay, Great you broke up a little bit as we were talking to I think I got I got most of it.
And.
So as we're thinking about that I already and then the final rulings is should we have an expectation that at some point are you know you know maybe going through the spring construction season.
The IRA rulings are behind us and some of that benefit from the Iranians.
Showing up in terms of more orders and the.
The industry on its feet.
Yeah, I think that's a fair assessment as soon as you get clarity there what that does for everybody that's investing as boost your returns.
On that investment because you get the incremental benefit so if you think about.
That really helps deal with similar inflationary issues that the industry has dealt with the last couple of years. It offsets that you can keep plowing ground, but.
You had a lot of customers right now that I think we're in a bit of a holding pattern because they felt like that was coming. So you know go ahead with the project and then then.
Some of them pause because they just don't quite have the clarity and they don't want to actually Miss out on the opportunity and so that's where you get a little bit of delay, but if those things come into play as.
As has been somewhat communicated industry early next year.
January February it's going to make.
Make a difference obviously going into.
The construction season in Q2, three and four for renewables as an industry for sure and for Us.
Okay, Great and then.
Maybe the last one for me and renewables. It's just the thought you know a lot has changed in the last couple of years I guess.
Uh huh.
Returns for for community solar.
You know you've hit the supply chain issues, you get a rising inflation labor costs.
Rising interest rates.
And you know and now you have offsets with the IRS benefits that'll happen or are these you know how has the return change do you think on on community solar projects is it better well yeah.
First of all whether it's community or utility I think it's the same question. So I'll try to answer this in a in.
And the best way.
That covers both but.
The levers that you would pull if youre investing had to do with okay. How do you negotiate the right PPA. So the power agreement that that Youre discussing it at what level can you get that and I think developers.
Developers in particular have worked that pretty hard and so as inflation has come into the fray they've been able to get.
Higher price points on their ppas.
That's actually what this all means such as the end of the day is as probably.
Price of energy any type of energy has gone up it's all relative solar has been able to go up with it in terms of the cost of that generation. So it's gonna be passed onto consumers that's happening regardless of how you are generating.
The energy so they havent released out there.
To offset the other inflationary things you just talked about now the IRA kicks in and that's where those incremental tax benefits can make a big difference. So those two levers on the plus side really do.
Kind of neutralized the cost issues.
Negative side and as a result, I think that's why you're continuing to see interest new interest into the into the industry and demand continuing to stay where it is.
And continue to grow so I feel like the economics are.
And listen project to project it could swing a bit but in general the folks have been in this business for a long time understand that.
Yeah.
Okay.
Hello.
I watched and people continuing to move forward.
Yeah.
I would say on the other side of that so that's the kind of return side.
Where it's got more challenging and frustrating for folks is just navigating through some of the administrative things whether its importation process or permitting process and I do think that is easing and will get better.
So those are the two buckets that I think about relative to the experience that a lot of our customers as they've had.
Okay, Great I appreciate that answer.
And then just one for me on residential you talked about how youre going to abnormal seasonality, where I guess your box stores, bringing down inventory levels.
I Wonder if you could maybe help us gauge that.
Is this going to be a bigger than normal inventory correction because of we're coming to an end of.
The the supply chain inventory buildup.
Or has that happened already.
Because some of your customers may have to work so hard this year to reduce our inventories.
No I think it actually happened last year same time. This year is just a reflection of what you typically would see in a normal.
Demand environment as supply and demand environment. So our point isn't that hey, this is a correction because everyone's overloaded. Our point is construction cycle starts to slow this time of year and people, who traditionally have always slow down here and they'll start to ramp up towards the end of Q1 to get ready for the construction cycle next year. So were just back to normal seasonality, but the real curve.
<unk> occurred a year ago, that's when we started to see it if you recall when supply chain start getting better commodities came down people have really started to flush out in the channel that started really Q3 last year Q4 and Q1. So this year, we're back to what we would consider to be normal prior to <unk>.
Pandemic.
If you go back and look at the data historically, that's what you would see actually.
They're pretty okay pretty normal seasonality.
Play in a residential business over the last really 50 years.
Okay, great. Thank you.
Mhm.
Our next question comes from the line of Julio Romero with Sidoti. Please proceed with your question.
Yeah.
Good morning, how are you guys doing.
Good how are you.
Yeah.
Yes, Mike My question is can you on on renewables can you talk about efforts the efforts that you've made to make the renewables segment less volume dependent and one way for further improvement operational operation I will get to that hand.
Yeah. It's a good question and we've talked about this a lot the last year or so.
You know we made the decision a couple of years ago, when things really started to push demand down in an industry that take advantage of this opportunity to figure out how to scale your business at a much different way such that you can have more levers to drive the profitability of this business. So that when volume comes back you should be in a better position that converted a higher rate.
It's pretty common sensible stuff, obviously, but ultimately for us when you think about our quote to cash processes everything we do from.
Making sure the business systems are tied together.
And in a much tighter way than they had been in the past from estimating all the way through released to fad to install in the field.
The tightening of that was a big effort for us and that's where I talked earlier about hey, keeping our investments going into digitizing. Our businesses. This was really critical in our construction oriented businesses like renewables, because we weren't as tight there. Therefore, we werent as scalable and if youre not scalable with good systems. You had you had a chance of making more.
Our mistakes and a construction business, where youre doing four or 500 fields a year. So we've really tightened up the team has done a fantastic job of bringing the systems and tying them together such that were much more scalable and we're less mistake.
Great and on.
These construction projects and that's really critical number one.
Because you can't afford to do that secondly, when you have this type of business. You also have to be very much linked and with supply chain and manufacturing I know it sounds very commonsensical to think about a project that may have been quoted in January of one year and finalized in January of the next year, So making sure you don't get out of whack with an inflationary.
The environment.
Such that it really impacts your P&L tightening up that quote process.
When you released the fab so you locked down the actual input cost you have.
Yes today than it was before so we don't have near as much exposure.
Thirdly.
It's really product lines and how your mix.
Sales and the impact of that has on margin. So if you recall our portfolio is pretty broad we have that we have.
And he boss solution that has been growing quite well we have a fixed tilt we have tracker and we have a new tracker.
It was launched a year and a half ago that really starting to take off so you mix well on your margins on your product lines as you drive your cost reduction.
And.
And in these new products are being very impactful for us.
And then thirdly, our if lastly, when you think about in the field.
We like the fact that we install a lot of things because it opens up another revenue and profit stream for us, but it is construction and so just like buttoning up inside your four walls with estimating.
Manufacturing et cetera, you've gotta be world class in the field as well and you've got to be efficient and so forth. So we've done a lot of work at all four buckets and we've done that in an environment where volumes have been down.
And so my point to everybody as if if at the end of the day, you believe or feel like the only lever you have is volume to drive your margin then that's a tough position to be in weeks.
We feel like where we have multiple levers to now pull in a much more effective way than we did before so it's really those four buckets over the last few years and we worked really hard on to be in today's position. So you know as some of these <unk>.
Headwinds ease on this industry and the volume starts to come back, yes, we should be in a better position to convert accordingly.
Then we would have been two years ago. So that's a.
So long answer to your question, but it's a pretty short answer relative to all the work that's actually been done, but thats, how we characterize it for you.
Oh, Thank you protocol at that makes sense.
Second question I have you have permitting delays obeyed it at all and what are you hearing from your customers in terms of where the local government.
<unk> are ramping up capacity to alleviate the permitting a bottleneck.
Yeah, I would say, it's still it's probably.
Similar to what it was last quarter and you know when you think about our customers are doing projects all over the all over the country. So it really comes down to the each each experienced they're having regard up you know based on where the field is that they're working on so it's hard for me to give you a.
A specific answer across each project, but what I would tell you in general is it's the number one challenge right now for our customers I think they only.
The positive and that is they don't feel like that's a structural issue that is.
A big change, it's just a ramp of capacity issue and.
I think they're optimistic that.
That's going to get.
It's going to continue to improve but it really comes down to each local municipality that youre working with to get the permitting in the first place and.
That's where it gets you know it's a case by case so.
Yeah, it's real and it has been and it needs to get better I don't think preventing people from signing new projects with us are signing contracts and get us deposits.
It's just a frustration I think they have.
As to when they can actually get started because you can imagine you're trying to lineup.
What you need to lineup to actually go to work right and so when you get pushed or 30 days or 60 days or what have you. It's more of a frustration that it is a structural issue that is a it's not like the U F. L. P was.
And it's not like waiting for the I R. A tax incentives to be finalized now those are structural things that when they slip.
And it would be very positive this is.
Frankly, a local localized capacity issue, that's got a ramp up and I think that it will happen and our customers feel like the.
Near term issue.
Thank you.
On Asbury.
Where are we on the 30 million dollar where this project is signed last quarter and secondly, any preliminary thoughts as to how big phase two can be.
Yeah.
And I didn't I'm, sorry, the last part of that any preliminary.
Can you repeat that as to how big any preliminary thoughts as to how big phase two can be.
Oh, yes, so sorry, yeah. So that was the project that Tim referenced we thought would start.
Beginning of the quarter. It started in September so that's often running.
You recall, that's a $30 million project I believe and so you'll start you'll see that start to read through in Q4.
And they really start to accelerate in September.
But it just pushed.
And again that can happen.
The phase two.
Probably be a little bit bigger than than phase one it's actually the seventh phase.
Have a very large complex that we built the entirety of over the last five years, but.
This is really a not to confuse everybody. This is the last two phases and I think the second phase is probably going to be anywhere from $10 million to $20 million bigger than the phase that we just started.
And I think we will have.
That come.
We will start working on that halfway through next year and hopefully get that across the finish line. It's not an issue of not hitting the business. We have it's just a matter of the timing of interest with our books.
That'll be the second half of next year, we'll see that sometime.
It's been exciting about this business is yes, we had this project that's kicked in but subsequent to last quarter, we started to see.
The backlog build on other projects.
As we started the fourth quarter.
So we're yes.
Yeah, we like we like what we're seeing like what we see evolving and we'll talk more about that next earnings release as we go through.
Some of these developments that we've been working on.
Yeah.
Thank you. Thank you. Thank you for taking my questions.
Thank you Mr. Baas way. It appears we have no further questions at this time I'd like to turn the floor back over to you for closing comments.
Okay. Thank you and thank you everyone today for joining us well coming up we expect to present in November at the UBS Industrials conference.
As well as the Bofa clean energy conference in January at.
At the CGS Winter Conference. In addition to some other market activity. So we look forward to updating you on our progress.
When we report our full year results I want to thank you again have a great day.
Thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.