Q4 2023 Quanex Building Products Corporation Earnings Call
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Good day and thank you for standing by and welcome to the Q4 fiscal 2023 Quarnex Building Project Corporation earning conference call. At this time, our participants on the Listen Only mode. After the speakers presentation, there'll be a question in the answer.
Good day, and thank you for standing by and welcome to the Q4 fiscal 2023 Quanex building products Corporation, earning conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a.
That's a question. During the session, you'll need to press star 11 on your telephone. You will be in an automated method, advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Scott Wilkie, SVP, CFO and Treasurer. Please go ahead.
A question during the session you will need to press star one on your telephone.
Or an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Scott Jokey, SVP CFO and Treasurer. Please go ahead.
Thanks for joining the call this morning. On the call with me today is George Wilson, our president and CEO . This conference call will contain forward-looking statements and some discussion of non- GAAP measures . Forward-looking statements and guidance discussed on this call and in our earnings release are based on current expectations.
Scott Jokey: Thanks for joining the call. This morning on the call with me today is George Wilson, our President and CEO. This conference call will contain forward looking statements and some discussion of non-GAAP measures forward looking statements and guidance discussed on this call and in our earnings release are based on current expectations actual results or events.
Actual results or events may differ materially from such statements and guidance. Quonics undertakes no obligation to update or revise any forward-looking statement to reflect new information or events. For more detailed description of our forward-looking statement disclaimer and a reconciliation of non-GAAT measures to the most directly comparable GAAT measures, please see our earnings release issued yesterday and posted to our website. I'll now turn the call over to George for his prepared remarks.
<unk> may differ materially from such statements and guidance Quanex undertakes no obligation to update or revise any forward looking statement to reflect new information or events for more detailed description of our forward looking statement disclaimer and a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Please see our earnings release.
Scott Jokey: Issued yesterday and posted to our website.
Scott Jokey: Now I'll turn the call over to George for his prepared remarks.
Scott Jokey: Yeah.
George Wilson: Thanks, Scott and good morning to everyone on the call.
And what turned out to be another year of operating in a macro environment with strong headwinds for the industries we serve, I am very pleased to announce that the performance of the Quantics team in our fiscal 2023 resulted in a record year for both adjusted earnings and cashflow.
George Wilson: And what turned out to be another year of operating in a macro environment with strong headwinds for the industries. We serve I am very pleased to announce that the procurements of the quanex team in our fiscal 2023 resulted in a record year for both adjusted earnings and cash flow.
Our team has stayed true to our mantra of controlling what we can control. In addition, we remain committed to our long-term growth with a purpose strategy and a position to company well to continue to create value for our shareholders.
George Wilson: Our team has stayed true to our mantra of controlling what we can control in.
George Wilson: In addition, we remain committed to our long term growth with a purpose strategy and have positioned the company well to continue to create value for our shareholders.
I would like to take this moment to thank the entire Quonix team for their spectacular performance and hard work this past year while continuing to make a difference with their caring and charitable endeavors in the communities where we are located.
George Wilson: I would like to take this moment to thank the entire quanex team for their spectacular performance and hard work. This past year, while continuing to make a difference with they're carrying and charitable endeavors in the communities, where we are located.
As I mentioned, 2023 was a year full of macro challenges that created headwinds for our top line.
George Wilson: As I mentioned 2023 was a year full of macro challenges that created headwinds for our top line.
The devastating war in Ukraine continued to negatively impact consumer confidence in Europe and added unknown risks to energy costs for the winter months.
George Wilson: The devastating war in Ukraine continued to negatively impact consumer confidence in Europe, and added unknown risks to energy cost for the winter months and.
In addition, we now have the war in Gaza, which again has the potential to disrupt markets, energy costs, and global free channels.
George Wilson: In addition, we now have a war in Gaza, which again has the potential to disrupt markets energy costs and global free channels.
In the United States, 2023 solar return to the more normal seasonality pattern that existed pre-COVID.
George Wilson: In the United States 2023 saw a return to the more normal seasonality pattern that existed pre COVID-19.
We also saw a housing market that slowed as a result of higher interest rates and elevated pricing and a repair and replacement market that softened throughout the year as COVID backlogs dissipated and more normal market drivers return.
George Wilson: We also saw a housing market that slowed as a result of higher interest rates and elevated pricing and our repair and replacement market. That's softened throughout the year as COVID-19 backlogs dissipated in more normal market drivers returned.
Finally, our top line was impacted by the raw material index pricing mechanisms that exist in North America for many of our key raw materials such as resin, steel, aluminum, wood, and oil.
George Wilson: Finally, our topline was impacted by the raw material index pricing mechanisms that exist in North America for many of our key raw materials such as resin.
George Wilson: Steel aluminum wood and oil.
As the prices for these raw materials dropped rapidly during the year, revenue dropped accordingly.
George Wilson: As the prices for these raw materials dropped rapidly during the year revenue dropped accordingly.
Notwithstanding these revenue challenges, our team remained focused on controlling what it could control, such as non-roll material customer pricing, service and the
George Wilson: Notwithstanding these revenue challenges our team remained focused on controlling what they could control such as non raw material customer pricing.
sourcing the fizzings and continuous improvement on initiative.
George Wilson: Service and delivery performance sourcing decisions and continuous improvement initiatives.
From a fixed cost perspective, we continuously challenged the status quo of our operating structure, worked with our employees on medical cost programs, and developed preventative programs to reduce expenses.
From a fixed cost perspective, we continuously challenge the status quo of our operating structure worked with our employees on medical cost programs and developed preventative programs to reduce expenses.
When combined, these focus areas contributed to what was another record year for adjusted earnings and cash generation.
George Wilson: When combined these focus areas contributed to what was another record year for adjusted earnings and cash generation.
Another accomplishment that I want to highlight from the year is our successful acquisition in an integration of the LMI custom mixing asset.
George Wilson: Another accomplishment that I want to highlight from a year is our successful acquisition and integration of the LMI custom mixing assets.
As a reminder, we bought the LMI assets in November of 2022 as the first move under our RGFresh growth strategy.
George Wilson: As a reminder, we bought the LMI assets in November of 2022, and the first move under our refreshed growth strategy.
While this was a relatively small acquisition, it was a familiar operation that represented low execution and integration risks.
George Wilson: While this was a relatively small acquisition it was a familiar operation that represented low execution and integration risk.
Looking at it now 12 months later, I think it is fair to say that it achieved all of the objectives that we had hoped it would.
George Wilson: Looking at it now 12 months later I think it is fair to say that it achieved all of the objectives that we had hoped it would.
First, if it's squarely within our material science and process engineering expertise.
George Wilson: It fits squarely within our material science and process engineering expertise.
Second, it expanded our product portfolio into a new and attractive category with products that serve different and growing in markets.
George Wilson: It expanded our product portfolio into a new and an attractive category with products that serve different and growing end markets.
And finally, the acquisition was both immediately accretive to adjusted EPS and improved our consolidated margin profile.
George Wilson: And finally, the acquisition was both immediately accretive to adjusted EPS and improved our consolidated margin profile.
In short, the LMI acquisition has accomplished everything that we set out to do. And I would like to thank Jim Nixon and the entire Quantix Custom Mixing Team, as well as the Cambridge, Ohio, North American, and Fenestration Team for their efforts in making this acquisition an integration a resounding success.
George Wilson: In short the LMI acquisition has accomplished everything that we set out to do and I would like to thank Jim Maxim and the entire quanex custom mixing team as well as the Cambridge, Ohio, North American fenestration team for their efforts in making this acquisition and integration a resounding success.
As for cash flow, our management of working capital and ability to capitalize on reduced materials, pricing contributed significantly to our year-over-year improvement in free cash flow. And it enabled us to repay 40 million of debt in Q4 alone.
George Wilson: Okay.
George Wilson: As for cash flow, our management of working capital and ability to capitalize on reduced materials pricing contributed significantly to our year over year improvement in free cash flow.
George Wilson: And it enabled us to repay $40 million of debt in Q4 alone.
It is important to note that we borrowed 92 million to acquire the LMI assets on November 1st, 2022 and repaid 90 million of debt throughout the fiscal 2023 year.
George Wilson: It is important to note that we borrowed 92 million to acquire the Rmi assets on November one 2022, and repaid $90 million of debt throughout the fiscal 2023 year.
Looking ahead the fiscal 2024, we expect to continue seeing a seasonal cadence that was normal before 2020.
George Wilson: Yes.
George Wilson: Looking ahead to fiscal 2024, we expect to continue seeing a seasonal cadence that was normal before 2020.
from a demand perspective, and based on conversations and forecasts we have received from our customers, we expect the volumes will be pressured in the first half of the year. We have already seen customers in both the fenestration and cabinet markets, announced longer than normal holiday shutdown period.
George Wilson: From a from a demand perspective, and based on conversations and forecast we received from our customers. We expect the volumes will be pressured in the first half of the year we.
George Wilson: We have already seen customers in both the fenestration in cabinet markets announced longer than normal holiday shutdown periods.
However, we believe demand for our products will begin to see an uptick in the second half of 2024. As consumer confidence starts to improve with the prospect of interest rates decreasing on the horizon.
George Wilson: However, we believe demand for our products will begin to see an uptick in the second half of 2024 as consumer confidence starts to improve with the prospect of interest rates decreasing on the horizon.
This should spur activity in the residential housing sector as we are still very underbuilt in both North America and Europe .
George Wilson: This should spur activity in the residential housing sector. As we are still very under built in both North America and Europe.
Looking forward at our growth initiatives, we will remain steadfast in following the parameters of our growth with a purpose or set in a different way, profitable growth strategy.
George Wilson: Looking forward at our growth initiatives, we will remain steadfast in following the parameters of our growth with a purpose or send in a different way profitable growth strategy. This.
This includes investment in both organic and inorganic growth projects.
George Wilson: This includes investment in both organic and inorganic growth projects.
From an organic growth perspective, we continue to invest in our compound development, space or development, and UPVC technology.
George Wilson: From an order from an organic growth perspective, we continue to invest in our compound development space or development and new PVC technologies.
continued growth in these areas will come through new product innovation and further expansion into flashing tapes, refrigeration spacer systems and solar panel sealant.
George Wilson: Continued growth in these areas will come through new product innovation and further expansion into flashing tapes refrigeration spacer systems and solar panels sealants.
We will also continue to explore opportunities for inorganic growth through acquisition.
We will also continue to explore opportunities for inorganic growth through acquisition.
With that said, we will remain diligent in our review and make sure any potential acquisition target either fills out an existing market channel or takes us into an adjacent market with better growth and profit potential.
George Wilson: With that said, we will remain diligent in our review and make sure any prevent potential acquisition targets either fills out an existing market channel, where it takes us into an adjacent market with better growth and profit potential.
In either case, we would expect margin accretion either on a standalone basis or through derived synergies in combination with our business.
George Wilson: In either case, we would expect margin accretion either on a standalone basis or through derived synergies in combination with our business.
Our strong balance sheet gives us flexibility and optionality. And we look forward to continuing to deliver results through both organic and inorganic opportunity.
George Wilson: Our strong balance sheet gives us flexibility and Optionality and we look forward to continuing to deliver results through both organic and inorganic opportunities.
I would like to now turn the call back over to Scott who will discuss our financial results in greater detail.
George Wilson: I would like to now turn the call back over to Scott, who will discuss our financial results in greater detail.
On a consolidated basis, we reported net sales of 295.5 million during the fourth quarter of 2023, which represents a decrease of 3.9 percent compared to 307.5 million for the same period of 2022.
Scott Jokey: Thanks George.
Scott Jokey: On a consolidated basis, we reported net sales of $295 5 million during the fourth quarter of 2023, which represents a decrease of three 9% compared to $307 5 million for the same period of 2022.
We reported net sales of 1.13 billion for the full year, which represent the decrease of 7.4% compared to 1.22 billion for 2022. The decreases were mostly attributable to softer market demand and lower pricing in North America.
Scott Jokey: We reported net sales of $1 3 billion for the full year, which represents a decrease of seven 4% compared to $1. Two 2 billion for 2022 to.
Scott Jokey: The decreases were mostly attributable to softer market demand and lower pricing in North America.
That income increased by 11% to 27.4 million or 83 cents per diluted share during the three months ended October 31st, 2023 compared to 24.7 million or 75 cents per diluted share during the three months ended October 31st, 2022.
Scott Jokey: Net income increased by 11% to $27 4 million or <unk> 83 per diluted share. During the three months ended October 31, 2023, compared to $24 7 million or <unk> 75 per diluted share. During the three months ended October 31, 2022 for the full year 2023 net income decreased by six.
For the full year 2023 net income decreased by 6.6% to 82.5 million or $2.50 per deluded chair compared to 88.3 million or $2.66 per deluded chair for the full year 2022.
Scott Jokey: 6% to $82 5 million or $2 <unk> per diluted share compared to $88 3 million or $2 66 per diluted share for the full year 2022.
On an adjusted basis, net income was 31.2 million, or 95 cents per deluded share during the fourth quarter of 2023, compared to 25 million, or 75 cents per deluded share during the fourth quarter of 2022.
Scott Jokey: On an adjusted basis net income was $31 2 million or <unk> 95 per diluted share during the fourth quarter of 2023 compared to $25 million or <unk> 75 per diluted share during the fourth quarter of 2022.
Adjusted net income was 90.9 million or $2.75 per diluted share for fiscal 2023 compared to 88.9 million or $2.68 per diluted share for fiscal 2022. The adjustments being made to EPS are primarily for foreign currency translation impacts, pension settlement events, and transaction and advisory.
Scott Jokey: Adjusted net income was $90 9 million or $2 75 per diluted share for fiscal 2023, compared to $88 9 million or $2 68 per diluted share for fiscal 2020 to the.
Scott Jokey: The adjustments being made to EPS are primarily for foreign currency translation impacts pension settlement accidents and transaction and advisory fees.
on an adjusted basis EBITDA for the quarter increased by 31.2% to 50.8 million compared to 38.7 million during the same period of last year.
Scott Jokey: On an adjusted basis EBITDA for the quarter increased by 31, 2% to $50 8 million compared to $38 7 million. During the same period of last year for the full year 2023, adjusted EBITDA increased by four 6% to $159 6 million, which is a new record for <unk>.
For the full year 2023, adjusted EBITDA increased by 4.6% to 159.6 million, which is a new record for Qonex compared to 152.5 million 2022. This equates to adjusted EBITDA margin expansion of approximately 160 basis points year over year.
Scott Jokey: X compared to $152 5 million in 2022, this equates to adjusted EBITDA margin expansion of approximately 160 basis points year over year.
The increase in adjusted earnings for the three months and 12 months ended October 31, 2023 was largely attributable to effective cost control, real price increases, a decline in raw material costs, and a decrease in income tax expense. strange rates. Now for real.
The increase in adjusted earnings for the three months and 12 months ended October 31, 2023 was largely attributable to effective cost control real price increases a decline in raw material costs and a decrease in income tax expense.
Scott Jokey: Now for results by operating segment.
We generated net sales of 180.5 million in our North American Finestration segment for the fourth quarter of 2023. An increase of 1.3% compared to 178.2 million in the fourth quarter of 2022. Driven by the contribution from the LMI mixing assets.
Scott Jokey: We generated net sales of $180 5 million and our North American Fenestration segment for the fourth quarter of 2023, an increase of one 3% compared to $178 2 million in the fourth quarter of 2022, driven by the contribution from the LMI mixing assets.
Excluding the contribution from the LMI assets, revenue would have been down approximately 11% year over year in the segment in the fourth quarter.
Scott Jokey: Excluding the contribution from the LMI assets revenue would have been down approximately 11% year over year in this segment in the fourth quarter we.
We estimate that volumes in this segment declined by approximately 9% year-over-year with the remainder of the revenue decline versus Q4 2022 due to a decrease in price.
Scott Jokey: We estimate that volumes in this segment declined by approximately 9% year over year with the remainder of the revenue decline versus Q4 of 2022 due to a decrease in price.
For the full year, we reported net sales of 667.5 million in on North American Finneastration Segment, a decrease of 2.9 percent compared to 687.5 million in 2022. The decrease was mainly due to softer market demand and lower price.
Scott Jokey: For the full year, we reported net sales of $667 5 million in our North American Fenestration segment, a decrease of two 9% compared to $687 5 million in 2022. The decrease was mainly due to softer market demand and lower pricing excluding.
excluding the contribution from the LMI assets, revenue would have been down approximately 14% year over year in this segment for the full year.
Scott Jokey: Excluding the contribution from the <unk> assets revenue would have been down approximately 14% year over year in this segment for the full year.
We estimate the volumes in this segment declined by approximately 13% year over year with the remainder of the revenue decline versus 2022 due to a decrease in price.
Scott Jokey: We estimate the volumes in this segment declined by approximately 13% year over year with the remainder of the revenue decline versus 2022 due to a decrease in price.
Adjusted EBITDA was 29.7 million in this segment for the fourth quarter or 40.2% higher than prior year, which equates to margin expansion of approximately 460 basis points a year over year.
Scott Jokey: Adjusted EBITDA was $29 $7 million in this segment for the fourth quarter or 42% higher than prior year, which equates to margin expansion of approximately 460 basis points year over year.
Adjusted EBITDA was 92.7 million in a segment for the full year, or 2.1% higher than 2022, which equates to margin expansion of approximately 70 basis points year-re.
Scott Jokey: Adjusted EBITDA was $92 7 million in this segment for the full year or two 1% higher than 2022, which equates to margin expansion of approximately 70 basis points year over year.
The successful execution on operational and sourcing initiatives resulted in benefits that outpaced inflation and gave us the ability to expand March.
Scott Jokey: The successful execution on operational and sourcing initiatives resulted in benefits that outpaced inflation and gave us the ability to expand margins there.
The group has also done a good job of controlling divisional SGNA despite lower volume.
Scott Jokey: The group has also done a good job of controlling divisional SG&A. Despite lower volumes. In addition, our custom quanex custom mixing business, formerly LMI continues to perform above expectations.
In addition, our quantum mixing business, formerly LMI, continues to form above expectations.
We reported net sales of 51.9 million in our North American Cabinet component segment during the quarter, which was 23.7% lower than prior year. For the full year, we reported net sales of 215.4 million, which represents a decline of 21.9% year-to-year. The decreases for both periods were driven by lower volumes and lower index pricing for hardware.
Scott Jokey: We reported net sales of $51 9 million in our North American Cabinet components segment during the quarter, which was 23, 7% lower than prior year for the full year, we reported net sales of $215 4 million, which represents a decline of 21, 9% year over year.
Scott Jokey: The decreases for both periods were driven by lower volumes and lower index pricing for hardwoods.
We estimate the volumes declined by approximately 13% and price declined by approximately 12% in this segment for the quarter.
Scott Jokey: We estimate the volumes declined by approximately 13% and price declined by approximately 12% in this segment for the quarter.
For the full year, we estimate the volume declined by approximately 18% with price declining approximately 4% versus 2020.
Scott Jokey: For the full year, we estimate the volumes declined by approximately 18% with price declining approximately 4% versus 2022.
The price declines for boat periods were largely related to index pricing tied to the decline in hardware.
Scott Jokey: The price declines for both periods were largely related to index pricing tied to the decline in hardwood costs.
The justity below was 5.1 million and 16.2 million in this segment for the quarter and full year respectively, which yielded margin expansion of approximately 250 basis points for the quarter and 130 basis points for the full year.
Scott Jokey: Adjusted EBITDA was $5 1 million and $16 $2 million in this segment for the quarter and full year, respectively, which yielded margin expansion of approximately 250 basis points for the quarter and 130 basis points for the full year.
The time lag related to our hardwood index pricing mechanism in this segment helped us with profitability in 2023 after hurting us on that front in 2022.
Scott Jokey: The time lag related to our hardwood index pricing mechanism. This segment helped us with profitability in 2023 after hurting us on that front in 2022.
We also did a good job of controlling costs throughout 2023.
Scott Jokey: We also did a good job of controlling costs throughout 2023.
Our European Administration's segment generated revenue of 64.2 million in the quarter, which represents an increase of 3.3 percent compared to 62.1 million in the fourth quarter of 2022.
Scott Jokey: Our European Fenestration segment generated revenue of $64 2 million in the quarter, which represents an increase of three 3% compared to $62 1 million in the fourth quarter of 2022.
We estimate the volumes declined about 5% year-rear in this segment, with pricing up approximately 1%, and positive foreign exchange translation impact of about 7%.
Scott Jokey: We estimate the volumes declined by about 5% year over year in this segment with pricing up approximately 1% and positive foreign exchange translation translation impact of about 7%.
For the full year, we reported net sales of 250.8 million in our European Administration segment. It decreased at 4.3 percent compared to 262.1 million in 2022.
Scott Jokey: For the full year, we reported net sales of $258 million in our European Fenestration segment, a decrease of four 3% compared to $262 1 million in 2022.
For the full year, we estimate the volumes declined by approximately 7% year-over-year in this segment with pricing up by approximately 5% and a negative foreign exchange translation impact of about two-
Scott Jokey: For the full year, we estimate that volumes declined by approximately 7% year over year in this segment with pricing up by approximately 5% and a negative foreign exchange translation impact of about 2%.
Adjusted EBITDA with $16.7 million and $59.9 million in this segment for the quarter and full year respectively, which yielded margin expansion of approximately 630 basis points for the quarter and approximately 480 basis points for the full year.
Scott Jokey: Adjusted EBITDA was $16 7 million and $59 $9 million in this segment for the quarter and full year, respectively, which yielded margin expansion of approximately 630 basis points for the quarter and approximately 480 basis points for the full year.
continued improvement in operational metrics combined with sourcing initiatives and pricing carryover all contributed to realizing margin expansion in this segment.
Scott Jokey: Continued improvement in operational metrics combined with sourcing initiatives and pricing carryover all contributed to realizing margin expansion in this segment.
Moving on to cash flow in the balance sheet. Cash provided by operating activities was $44.5 million for the fourth quarter of 2023, and $147.1 million for the full year 2020.
Scott Jokey: Moving on to cash flow and the balance sheet cash provided by operating activities was $44 5 million for the fourth quarter of 2023, and $147 1 million for the fourth for the full year 2023, which represents a decrease of seven 5% and an increase of 51% respectively.
which represents a decrease of 7.5% and an increase of 50.1% respectively compared to the same periods of 2022. We did a very good job managing working capital and the value of our inventory continued to decrease throughout 2023 due to easing raw material and flash-scinary pressures which also had a positive impact on working capital.
Scott Jokey: Compared to the same periods of 2022, we did a very good job managing working capital and the value of our inventory continued to decrease throughout 2023 due to easing raw material inflationary pressures.
Scott Jokey: Also had a positive impact on working capital.
We generated free cash of 109.7 million for the full year in 2023, an increase of 69.1% over 2022, and a new record for Qantas.
Scott Jokey: We generated free cash of $109 7 million for the full year in 2023, an increase of 69, 1% over 2022, and a new record for quanex.
Our balance sheet remains strong. Our liquidity keeps improving, and our leverage ratio of net debt to last 12 months of just the EBITDA was point one times as of October 31st, 2023.
Scott Jokey: Our balance sheet remains strong our liquidity keeps improving and our leverage ratio of net debt to last 12 months. Adjusted EBITDA was one times as of October 31 2023.
Including real estate leases that are considered finance leases under US Gap, we are essentially net debt free.
Scott Jokey: Excluding real estate leases that are considered finance leases under U S. GAAP were essentially net debt free.
As George mentioned, we were able to repay 90 million of debt throughout fiscal 2023, 40 million during key four loans.
Scott Jokey: As George mentioned, we were able to repay $90 million of debt throughout fiscal 2023 $40 million during Q4 alone.
Looking forward, we will remain focused on things that we can control. We will also continue to identify organic and inorganic profitable growth opportunities as they arise, while continuing to preserve our healthy balance sheet. As always, the goal is to create.
Scott Jokey: Looking forward, we will remain focused on things that we can control. We will also continue to identify organic and inorganic profitable growth opportunities as they arise while continuing to preserve our healthy balance sheet.
Scott Jokey: As always the goal is to create shareholder value.
As mentioned in the earnings release, based on current macro indicators, recent conversations with our customers, limited transparency and varying opinions on the outlook for 2024, we're taking a thoughtful approach to guidance. We intend to revisit guidance for 2024 when we report earnings for the first quarter. However, for modeling purposes on a consolidated basis, please use the following assumptions for fiscal 2024 until we give official guidance.
Scott Jokey: As mentioned in the earnings release based on current macro indicators recent conversations with our customers limited transparency and varying opinions on the outlook for 2024, we're taking a thoughtful approach to guidance, we intend to revisit guidance for 2024, when we report earnings for the first quarter.
However for modeling purposes on a consolidated basis. Please use the following assumptions for fiscal 2024 until we give official guidance.
Load amid single digit decline in that sales and some margin pressure compared to fiscal 2023.
Scott Jokey: Low to mid single digit decline in net sales and some margin pressure compared to fiscal 2023.
Appreciation and amortization of approximately 44 to 46 million SGNA of 128 to 130 million Interest expense
Scott Jokey: Depreciation and amortization of approximately 44% to $46 million.
Scott Jokey: SG&A of $128 million to $130 million.
Scott Jokey: Interest expense of $5 to $5 5 million.
Tax rate of 20% and capex of 40 to 45 million.
Scott Jokey: Tax rate of 20%.
Scott Jokey: And capex of $40 million to $45 million.
From a cadence perspective for the first quarter of 2024 versus the first quarter of 2023, we expect revenue to be down 10 to 12% on a consolidated basis.
Scott Jokey: From a cadence perspective for the first quarter of 2024 versus the first quarter of 2023, we expect revenue to be down 10% to 12% on a consolidated basis.
By segment for the first quarter of 2024 compared to the first quarter of 2023, we expect revenue to be down 5% to 7% in our North American Finnestration segment, down 25% to 27% in our North American Cabinet Component segment, and down 8% to 10% in our European Finnestration segment.
Scott Jokey: By segment for the first quarter of 2024 compared to the first quarter of 2023, we expect revenue to be down 5% to 7% and our North American Fenestration segment.
Scott Jokey: Down, 25% to 27% and our North American cabinet components segment, and down 8% to 10% in our European Fenestration segment.
from a margin perspective for the first quarter of 2024 compared to the first quarter of 2023. We expect minor, adjust the margin expansion and both administration segments, but margin decline in our North American cabinet components. Sex.
From a margin perspective for the first quarter of 2024 compared to the first quarter of 2023, we expect minor adjusted EBITDA margin expansion in both fenestration segment the margin decline in our North American Cabinet components segment.
On a consolidated basis, we currently expect a justity of it a margin to be flat, to down 50 basis points in the first quarter of 2024. Again, compared to the first quarter of 2023.
Scott Jokey: On a consolidated basis, we currently expect adjusted EBITDA margin to be flat to down 50 basis points in the first quarter of 2024 again compared to the first quarter of 2023.
Operator we will now take your question and Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be a
Speaker Change: Operator, we will now take your questions.
Speaker Change: And thank you.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster and one moment for our first question.
If you would draw your question, please press star one one again. Please stand by while we compile the Q&A roster. And one moment if our first question. One moment for our first question. And our first question comes.
Speaker Change: One moment for your first question.
Speaker Change: And our first question comes from.
Steven Ramsey from Thompson Research Group. Your line is now open.
Steven Ramsey: Hi, good morning.
I have a warning, they can start with the North America fenestration segment organically down 14%. I believe for the year, you're looking at the first quarter decline being much better than previous organic rates. I guess maybe unpacked the improvement there. How much of that is just constant and other drivers to bridge that outlook to the past.
Steven Ramsey: Maybe just wondering.
Good morning, ladies and start with the North America Fenestration segment organically.
Steven Ramsey: Organically down 14%.
Steven Ramsey: I believe for the year Youre looking at the first quarter decline.
Steven Ramsey: Much better than <unk>.
Steven Ramsey: Previous organic rates I guess.
Steven Ramsey: Maybe unpack the improvement there how much of that is just comps and other.
Steven Ramsey: Drivers to bridge that.
Outlook.
Steven, I'll take that question.
Steven Ramsey: Yes.
Steven Ramsey: Stephen I'll take that question.
Really the major difference between this year and last year and Q1 for NAF on a revenue perspective is in our space or segment where if you remember last year we talked quite a bit about that that that product line being down heavily last year due to.
Really the major difference between this year and last year in Q1 for NAF on a revenue perspective is in our spacer segment, where if you remember last year, we talked quite a bit about that that that product line being down heavily last year due to.
customers destocking or bleeding down their inventory. It's the one product line that we manufacture that has the ability to be packaged and put into a warehouse fairly easy. So throughout the year and really in that first half of last year, our customers, we saw quite a bit of those destocking activities. And now we're really back with our lead times back to being normal.
Steven Ramsey: Customers.
Steven Ramsey: Destocking or bleeding down their inventory, it's the one product line that we manufacture that has the ability to be packaged and put into a warehouse fairly easy so.
Steven Ramsey: Throughout the year and really in that first half of last year our customers.
Steven Ramsey: We saw quite a bit of those destocking activities and now we're really back.
effectively a just in time or make the order which is typically our model so what we're seeing now is is normalized shipment and production rates specifically in that area
Steven Ramsey: With our lead times back to being normal.
Steven Ramsey: And effectively.
Just in time or make the order, which is typically our model. So what we're seeing now is normalized.
Steven Ramsey: Shipment and production rates specifically in that area.
Okay, helpful. And then on the full year outlook then bridging the past to what you said for the first quarter and the improvement expected. The second half outlook of growth.
Steven Ramsey: Okay.
Speaker Change: Okay helpful and then on the full year outlook then bridging.
Speaker Change: The past Q, what you said for the first quarter and the improvement expected.
What are the drivers behind that, maybe the end market?
Speaker Change: In the second half outlook of growth.
Speaker Change: What are the drivers behind that that maybe the end markets looking at existing home sales potentially for R&R and new construction.
looking at existing home sales potentially for R&R, new construction, restocking potentially. What are the key drivers to the second half being better than the first?
Speaker Change: Restocking potentially what are the key drivers to the second half being better than the first half.
So I think our view on the second half is really from the conversations we continue to hear from economists as well as our customers that we are still very underbuilt in both of our markets and as, and especially as we've seen over the last week, with some signals that there could be some easing in interest rates that the second half of this year
Speaker Change: So I think our view on the second half is really from our conversations we continue to hear from from economist as well as our customers.
Speaker Change: We are still very under built in both of our markets and as and especially as we've seen over the last week with some signals.
Speaker Change: There could be some evening.
Speaker Change: And interest rates.
Speaker Change: The second half of this year.
looks to have the potential of being fairly robust. More so than was probably anticipated six months ago. So I think we've seen a shift in confidence level on the back half of the year from a lot of different parties which reinforces why we believe our second half will be strong as well. Yes, Stephen and then I've obviously combined those comments with just the typical seasonality of our business. The first half is always weaker than the second half in a normal year.
Speaker Change: It looks to have the potential of being fairly robust more so than was probably anticipated six months ago. So I think we've seen a shift in confidence level on the back half of the year for a lot of different parties, which reinforces why we believe our second half will be strong as well, yes, Steven and then obviously combined.
Speaker Change: Those comments with just the typical seasonality of our business. The first half is always weaker than second half in a normal year.
Okay helpful. And then last one for me on the edge.
on the LMI deal to discuss some of the success and learning from that.
Speaker Change: LMI deal, which you discussed some of the success and learnings from that.
I guess firstly on LMI is to stand alone margin there better now than it was a year ago. What are the next steps for LMI?
Speaker Change: Firstly on LMI as the stand alone margin there better now than it was a year ago. What are the next steps for LMI.
And then kind of lastly, high level, you've successfully done that deal and debt is now paid down. You feel like you're ready to do more deals or does this environment with it's uncertainty, make it tougher to do deals.
And then kind of lastly high level.
That's fully done that deal and that has now paid down do you feel like you are ready to do more deals or does this environment with uncertainty make it tougher to do deals.
I'll answer the first part of the question then, turn and let's go comment on this second half. So as it relates to Elamaya, I think we have seen improvement in our margins. It has to deal with more of their customer and ricks. And as they continue to expand out of what was traditionally their normal joint venture partners.
I'll answer the first part of the question and then turn and let Scott comment on the second half so as it relates to <unk> I think we have seen improvement in our margins and it has to deal with more of their customer and Rex and as they continue to expand out of what was traditionally their normal Georgia joint venture partners we.
We've made it a priority for us to continue to grow their revenue in different markets and different segments. And we are seeing benefits from that initiative and will continue to invest heavily in that mixing business.
Made it a priority for us to continue to grow their revenue in different markets in different segments, and we are seeing benefits from that initiative and we'll continue to invest heavily in that mixing business.
both through investment in developing new compounds, investments in expanding our sales force, and as well as looking at acquisitions to add on to that we like.
Speaker Change: Both through our investment in developing new compounds investments in expanding our sales force as well as looking at acquisitions to add onto that we like.
The business very much we like the addition of new
Speaker Change: The business very much we like the addition of new.
additional markets and again couldn't be happier with what we've accomplished and learned through that process. As it relates to new acquisitions.
Speaker Change: Additional markets and again couldn't be happier.
Speaker Change: What we've accomplished and learned through that process.
Speaker Change: As it relates to new acquisitions.
you know, I think we're in a pretty good spot to be able to be functional if we saw something we would like and I'll let Scott expand more on that as well.
Speaker Change: I think we're in a pretty good spot.
Speaker Change: To be able to be functional if we saw something we would like and I'll, let scott expand more on that as well.
Yeah, I think what I'm going to say around the acquisition front and this environment is we've positioned ourselves
Scott Jokey: Yes, I think what I'd say around the acquisition front in this environment as we have positioned ourselves with.
optionality. We don't have to do anything however something comes across our desk that we feel like we'll add value to shareholders over time. We will take a hard look as long as it checks certain boxes and we are going to be very methodical like we have in the past on any acquisitions we may do. So just because there's some uncertainty in the market I wouldn't say that we are closed to looking at acquisitions at all. Okay, that's helpful. Thank you.
With Optionality, we don't have to do anything however, if something comes across our desk that we feel like we will add value to shareholders over time, we will take a hard look as long as the check certain boxes and we get we are going to be very methodical like we have in the past on any acquisitions. We may do so just because there is some uncertainty in the market.
I wouldn't say that we are close to looking at acquisitions at all.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: And thank you.
Speaker Change: And one moment our next question.
And our next question comes from Ruben Gardner. From benchmark, your line's now open.
Speaker Change: And our next question comes from Reuben Garner.
Reuben Garner: From benchmark your line is now open.
Thank you good morning, everybody.
So Steven mentioned the word re-stock. And you guys talked about kind of the destocking impact this year, just curious, you know, inventory in the channel. I know some of your products aren't really inventory, but so I know we're talking about just part of your business. But what is the inventory like relative to maybe more historically normal periods? And you know, we've seen rates drop quite a bit here.
Reuben Garner: Hey, Ruben.
Reuben Garner: So.
Reuben Garner: Stephen mentioned, the word restock and.
Reuben Garner: And you guys talked about kind of the Destocking impact this year.
Speaker Change: Just curious.
Inventory in the channel I know some of your products aren't arent really.
Speaker Change: Inventory, but sorry, I know, we're talking about this part of your business, but what is what is the inventory like relative to maybe more historically normal period than we've seen rates dropped quite a bit here recently and some maybe excitement about what that could mean.
recently and some maybe excitement about what that could mean for housing kind of.
heading into 23 is there the potential that your first half is sort of
Speaker Change: For housing kind of <unk>.
Speaker Change: Heading into 'twenty three is there the potential that your first half is sort of.
Your first half outlook is maybe a little conservative, just given the potential for a restock, if there is a better consumer and housing environment in the early part of next year.
Your first half outlook is maybe.
Speaker Change: A little conservative just given the potential for a restocking if there is a better consumer and housing environment in the early part of next year.
Yeah, so the first part of the question in terms of our inventory levels, I think we're in a very good position right now. As you know, I think we manage our working capital very well in effectively, we're a just in time supplier. So what has changed in what we've done a very good job over the last year and a half to two years is with some of the supply chain challenges that we have that extended lead times and did different things that
Yes. So the first part of the question in terms of our inventory levels I think we're in a very good position right now.
Speaker Change: As you know I think we manage our working capital very.
Speaker Change: Very well.
Speaker Change: Effectively we're adjusting time supplier so.
Speaker Change: What has changed in what we've done a very good job over the last year and a half to two years is with some of the supply chain challenges that we have that extended lead times in <unk>.
forced our customers into stocking whatever they could. I think we've done a very, very good job of improving our supply chain, finding alternate sources. We've really improved the robustness of that entire chain, which has allowed us to drive our inventory levels down. And as such, give our customers confidence to drive their inventory levels down. That's what we do. So I feel very comfortable going into this year.
Speaker Change: Did different things.
Speaker Change: First our customers into stocking whatever they could.
Speaker Change: We've done a very very good job of improve.
Speaker Change: Improving our supply chain finding alternate sources, we've really improved the robustness of that entire chain, which has allowed us to drive our inventory levels down and as such give our customers confidence to drive their inventory levels down and Thats, what we do so I feel very comfortable going into this year.
Whether the markets go up or down, that we are absolutely prepared to react and react accordingly to that.
Speaker Change: Whether the markets go up or down that we are absolutely prepared to react and react accordingly to that.
As it relates to, are we being conservative in the first quarter?
Speaker Change: As it relates to <unk>.
You know, I think traditionally we are a more conservative forecasting company and you know.
Speaker Change: We're being conservative in the first quarter.
Speaker Change: I think traditionally we are a more conservative forecasting.
I think what we've shown over that again over the course of the last really three or four years is that...
Speaker Change: Company.
Speaker Change: I think what we've shown over again over the course of the last really three or four years.
cost model reacts very well to wrap it up and down. So I feel very good of where we're positioned in either scenario and if interest rates come down or demand spikes as a result of that, I think we're very, very prepared to capitalize on that. But we are taking a very conservative view as it relates to the first quarter and really our first house.
Speaker Change: Sure.
Speaker Change: Our cost model reacts very well to wrap it up and down so I feel very good of where were positioned and.
Speaker Change: In either scenario and if if interest rates come down or demand spikes as a result of that I think we're very very prepared to capitalize on that.
Speaker Change: We are taking a very conservative view as it relates to the first quarter and really our first half.
Great, that actually helped answer my second question. So I'm gonna ask another...
Speaker Change: Great.
Speaker Change: <unk> helped answer my second question someone after another.
There's been some increasing concern about Europe and I know your business is predominantly in the UK. I've heard that come up a way. Your business has actually been...
Speaker Change: There's been increasing concern about Europe, and I know your businesses.
Speaker Change: Predominantly in the UK I've heard that come up of laser business has actually been.
Pretty resilient in the face of that uncertainty. Can you just kind of talk about your outlook there for this year, maybe just kind of dig into some of the reasons why maybe your business is more resilient than some others might be seeing in the same kind of jog.
Pretty resilient.
Speaker Change: In the face of that uncertainty can you just kind of talk about your your outlook. There for this year, maybe just kind of.
Speaker Change: Dig into some of the reasons why maybe your business is more resilient.
Speaker Change: Than some others.
Might be seeing in the same kind of geographies.
So when you look at both of our businesses, I think...
Speaker Change: So when you look at both of our businesses I think.
It's been resilient because our product lines are designed to perform at a higher thermal performance level. And as codes and standards continue to...
Speaker Change: It's been resilient because our product lines are designed to perform at a higher thermal performance level and as codes and standards continue to improve.
to be elevated to higher levels in Europe . It's pretty known that Europe is far ahead of US and other markets in terms of...
Speaker Change: To be elevated to higher levels.
Speaker Change: In Europe.
It's pretty known that Europe is far ahead of U S and other markets in terms of the.
the expectations for environmentally positive products within the home. And our products fulfill those expectations. So we have a product line that is relatively robust even in down areas. So that has helped.
Speaker Change: Expectations for environmentally.
Positive products within the home and our products fulfill those expectations. So.
Speaker Change: We have a product line.
Speaker Change: Is relatively robust even in down areas. So that has helped.
I think that there is still so many unknowns in Europe , which are impacting customer confidence that...
Speaker Change: I think that there is still so many unknowns in Europe, which are impacting customer confidence.
I think the macro fundamentals that exist are very, very similar in terms of the U.S. in terms of it being under-built and everything of that nature, but you've got this overlay of what's going on in the Ukraine and now in Gaza that has a fairly dark cloud on, you know.
Speaker Change: I think the macro fundamentals that exist are very very similar in terms of the U S. In terms of it being under built and everything of that nature, but you've got this this overlay of what's going on in the Ukraine and now in Gaza.
A fairly dark cloud on on.
consumer confidence and these unknowns Hangover, you know, what will the impact of energy cost beyond a consumer and I think that that's a little It's added a different type of weight to to demand in our markets that we serve in Europe versus the US
Speaker Change: When consumer confidence and these unknowns.
Speaker Change: Hangover.
Speaker Change: What will be impact of energy cost will be on a consumer and I think that thats a little.
A different type of weight.
Speaker Change: To demand.
Speaker Change: In our markets that we serve in Europe.
The other thing that's helped us though in that region and this is specifically with our space or product line is that we've invested pretty large in terms of our international space or business which is primarily served out of our German facility. So as we continue to gain new sales and other markets such as the Middle East or India, China in different areas.
Speaker Change: Versus the U S.
Speaker Change: The other thing Thats helpful helped Costco in that region and this is specifically with our space our product line is.
Speaker Change: We've invested.
Speaker Change: Pretty large in terms of our international Spacer business, which is primarily served out of our German Germany facility. So as we continue to gain new sales when other other markets such as the middle East or India or China.
for some of our high-end spacer product lines. That has helped offset some of the volume drops in the traditional European market. So I think we've positioned ourselves well there.
In different areas.
Speaker Change: For some of our high Im spacer product lines that has helped offset some of the volume drops and the traditional European market. So I think we've positioned ourselves well.
Great, thanks for the detailed guide and congrats on the year and Merry Christmas and Happy New Year.
Speaker Change: Great. Thanks for the detail guys congrats on the year end.
Thanks, E-Tex, for you too. And thank you. And one moment for our next question.
Speaker Change: Christmas and happy new year.
Speaker Change: Thanks <unk> for Youtube.
Speaker Change: And thank you.
[laughter].
And one moment our next question.
Speaker Change: And our next question comes from Julio Romero.
Julio Romero: From Sidoti <unk> Company. Your line is now open.
Julio Romero: Thanks, Hey, good morning, George and Scott.
Hey, can you guys maybe talk about...
Speaker Change: Good morning.
Speaker Change: Hey can you guys maybe talk about.
You know, repair a remodel, spend in the near term, we talk about your customers, someone that have announced longer than normal holiday shutdowns, I understand the choppy kind of first half outlook, but maybe if you can help us think about maybe a range of outcomes for volumes in the first half.
Speaker Change: Okay.
Speaker Change: Repair and remodel spend in the near term you talked about your customers and now have announced longer than normal holiday shutdowns I understand the choppy kind of first half outlook, but maybe if you can help us think about maybe a range of outcomes for volumes in the first half.
You know, we've seen a bigger impact in our cabinet segment. Obviously, you can see the volumes there, what we're projecting being down more so than others. You know, that's a combination of...
Speaker Change: We've seen a bigger impact.
In our cabinet segment, obviously, you can see the volumes there were projecting being down more so than others.
Speaker Change: That's a combination of Ah.
COVID pull forward some of the seasonality backlogs dropping, you know, I think that impact and that mainly R&R there. Those markets will be hit a little harder in the first half than anything else that we see.
Speaker Change: The COVID-19 pull forward some of the seasonality backlog is dropping.
I think that impact and that mainly R&R there.
Speaker Change: Those markets will be hit a little harder in the first half and anything else that we see.
Speaker Change: <unk>.
The opportunity for an improvement more so than what we're forecasting.
Speaker Change: Yeah.
Speaker Change: So the opportunity for <unk>.
An improvement more so than what we're forecasting.
You know, I suspect it's there. A lot of it is dependent upon some of the macro things. I mean, if the Fed comes out and lowers interest rates and you start to see some of that consumer confidence build, I think that there still is a lot of pen up demand in all the product lines that we serve and that there is a possibility. As I mentioned, Ruben,
Speaker Change: I suspect. It's there are a lot of it is dependent upon some of the macro things preferred comes out and lowers.
Interest rates and you start to see some.
Speaker Change: Consumer confidence build.
Speaker Change: I think that there still is a lot of pent up demand.
Speaker Change: All the product lines that we serve and that there is a possibility as I mentioned to Ruben.
you know, we traditionally do take a little conservative view. So I think the opportunity for upside is greater than than not. But.
Speaker Change: We traditionally do take a little.
Speaker Change: Conservative view, so I think the opportunity for upside is greater than.
Speaker Change: Than not.
Speaker Change: <unk>.
Speaker Change: But.
depending upon the Fed and the weather building season, because again, as we go back to a more seasonal pattern, if you remember, Scott said our first half tends to be significantly slower, that's dope, and a lot of that has to do with the building season. So hopefully we have a mild winner, and the builders can keep the one or things to help.
Speaker Change: Dependent upon the fed.
Speaker Change: Other whether building season, because again as we go back to a more seasonal pattern. If you remember Scott said, our first half tends to be significantly slower that's dealt in a lot of that has to do with the building season.
Speaker Change: Hopefully, we have a mild winter and the builders can keep going there things to help.
fulfill that upside that we think is probably there.
Speaker Change: Fulfill that upside that we think is probably there.
Speaker Change: Okay.
Speaker Change: Got it I appreciate the color there maybe.
Going back to LMI a little bit, can you maybe give us some flavor for the primary and markets that are currently driving LMI sales? I know you had talked about I think about eight different in markets when you did the deal, but maybe just highlight for us what are the top one or two in markets that LMI currently sells into?
Coming back to LMI, a little bit.
Can you maybe give us some flavor for the primary end markets that are currently driving LMI sale as I know.
Speaker Change: You have talked about I think about a different end markets. When you did the deal but.
Speaker Change: Maybe just highlight for us what are the top one or two end markets that LMI currently sells into.
So they sell on the worldwide variety. That's, it's pretty diverse. Market set, they have a piece of business that goes into automotive. We have a piece of the business that goes into windows and doors, some other types of building products. We have...
Speaker Change: So they sell into a wide variety of events.
Speaker Change: Pretty diverse markets.
<unk>.
Speaker Change: They have a piece of business that goes into automotive we have.
Speaker Change: A piece of our business that drove into windows and doors. Some other types of building products we have.
Some of the products that go into electronics and consumer goods and we actually have you know some products that go like into You know pet toys
Speaker Change: Some of the products that go into electronics consumer goods, and we actually have some products that go back into.
So a wide range of markets that continues to expand and grow. No one market really dominates anything.
Speaker Change: Pet toys.
Speaker Change: So a wide range of markets that continues to expand and grow no one market really dominates anything.
Okay, got it. And maybe thinking about the preliminary assumptions for fiscal 24.
Speaker Change: Okay got it and maybe thinking about the <unk>.
Speaker Change: The preliminary assumptions for fiscal 'twenty four.
How do you guys think about free cash shaking out, especially after you just had a really strong physical 23? And does work on capital, you know, become a benefit, a use of cash or kind of new tools?
Speaker Change: How do you guys think about free cash shaking out, especially after you just had a really strong fiscal 'twenty three.
Speaker Change: And as working capital.
From a benefit a use of cash or kind of neutral.
So clearly working capital was a benefit in 2023. It took a big hit actually in 2022. So as we forecast this year,
Speaker Change: So clearly working capital was a benefit in 2023, it took a big hit actually in 2022, so as we forecast this year.
Roughly flat. I mean, there may be a little benefit. There may be a little hit depending on how the year transpires, but we're not expecting huge swings and working capital this year. Now, I mean, obviously, free cash flow, we had a record year at 110 million. I think there's probably probably going to hit somewhere lower than that this year. Plus, we expect to spend a little more on the capex size.
Speaker Change: Roughly flat I mean, there may be a little benefit there may be a little here, depending on how the year transpires, but we're not expecting huge swings in working capital this year.
Speaker Change: Now I mean, obviously free.
Speaker Change: Free cash flow, we had a record year at $110 million.
Speaker Change: There is probably probably going to hit somewhere lower than that this year, plus we expect to spend a little more on the capex side.
And we'll get more concrete numbers around that when we get official.
Speaker Change: And we'll give more concrete numbers around that when we give official guidance.
Gotcha, that dovetails into my very last one, which is the cat-back's range of 40 to 45 million. Kind of nice to see that step up there. Just maybe talk about the key organic growth initiatives that are targeted with that cat-back step up.
Speaker Change: Gotcha that dovetails into my very last one which is the capex range of $40 million to $45 million and a nice to see that step up there just maybe talking about the key organic growth initiatives that are <unk>.
Speaker Change: Targeted with that Capex step up.
Yes, so as mentioned a little bit in my section of the script, we have juice up the R&D and development of new products. So I think you'll see investment, continued investment, or our UPVC facility specifically in the UK market as we continue to do things both from a product line and a facility perspective there.
Speaker Change: Yes, so as I mentioned, a little bit in my section of the script.
Speaker Change: We have.
Speaker Change: Juiced up the R&D and development of new products. So I think youll see investment continued investment in our PVC facilities for.
Speaker Change: Specifically in the UK market as we continue to do things both from a product line and a facility perspective there.
continued development of new compounds and adhesives and fuelants within our space or business and the mixing compounds. Those will be the priorities, but really starting to invest more heavily in new product development than it's been traditionally seen from us.
Speaker Change: <unk> continued development of new.
Speaker Change: Compounds in adhesives, and sealants within our spacer business in the mixing compounds those would be the priorities.
Speaker Change: Really starting to invest.
Speaker Change: More heavily in new product development.
Speaker Change: <unk> traditionally.
Speaker Change: Seen from from Us.
Speaker Change: Got it thanks very much for taking the questions.
Speaker Change: Yes. Thanks.
And I'm showing no further questions. I would not like to turn the call back over to George Wilson for closing.
Speaker Change: And thank you.
Speaker Change: And I'm showing no further questions I would now like to turn the call back over to George Wilson for closing remarks.
Yeah, I'd like to thank everyone for joining us today and I'd like to take this opportunity to wish everyone a very, very safe and as holiday season and we look forward to providing an update on our next earnings call, our first quarter call in a really marked thank you.
George Wilson: Yes, I'd like to thank everyone for joining us today and I'd like to take this opportunity to wish everyone a very safe.
George Wilson: This holiday season, and we look forward to providing an update on our next earnings call. Our first quarter call in early March. Thank you.
This concludes today's conference call. Thank you for participating. You may now.
Speaker Change: This concludes today's conference call. Thank you participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.