Q2 2024 Kadant Inc Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Q2 2024 Kadant Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I would now like to hand the conference over to your speaker today, Michael McKenney, Executive Vice President and Chief Financial Officer.
Good day, and thank you for standing by. Welcome to the Q2 2024 Kadant Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
Speaker Change: Good day and thank you for standing by welcome to the Q2 2024 Cadent earnings Conference call. At this time all participants are in a listen only mode. Please be advised that today's conference is being recorded after the speaker's presentation there'll be a question and answer session to ask a question. Please press <unk>.
Michael J. McKenney: Star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again I would not like to hand, the conference over to your Speaker today, Michael Mckenney, Executive Vice President and Chief Financial Officer.
Josh: I would not like to hand the conference over to your speaker today, Michael McKenney, Executive Vice President and Chief Financial Officer.
Michael Mckenney: Thank you, Josh.
Michael J. McKenney: Thank you, Josh. Good morning, everyone, and welcome to Kadent's second quarter 2024 earnings call. With me on the call today is Jeff Powell, our President and Chief Executive Officer. Before we begin, let me read our safe harbor state.
Jeff Powell: Good morning, everyone, and welcome to Kadant's second quarter 2024 earnings call. With me on the call today is Jeff Powell, our president and chief executive officer.
Michael J. McKenney: Thank you Josh.
Speaker Change: Good morning, everyone and welcome to cadence second quarter 2024 earnings call.
Michael J. McKenney: With me on the call today is Jeff Powell, our President and Chief Executive Officer.
Michael Mckenney: Before we begin, let me read our safe harbor statement. Various remarks that we may make today about Kadant's future plans and expectations. Financial and operating results and prospects are forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation and those discussed under the heading Risk Factors in our annual report on Form 10-K for the fiscal year ended December 30th, 2023, and subsequent filings with the Securities and Exchange Commission.
Michael J. McKenney: Various remarks that we may make today about Kadant's future plans and expectations, financial and operating results, and prospects are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those outlined at the beginning of this slide presentation and those discussed under the heading Risk Factors in our annual report on Form 10-K for the fiscal year ended December 30, 2023, and subsequent filings with the Securities and Exchange Commission.
Speaker Change: Before we begin let me read our safe Harbor statement.
Michael J. McKenney: In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today. While we may elect to update such forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views or estimates change. During this webcast, we will refer to some non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles. A reconciliation of Non-Gap Financial Measures to the Most Directly Comparable Gap Measures is contained in our second quarter earnings press release and the slides presented on the webcast and discussed in the conference call, which are available in the investor section of our website at www.kadant.com.
Speaker Change: Various remarks that we may make today about cadence future plans and expectations financial and operating results and prospects are forward looking statements for purposes of Safe Harbor provisions under the private Securities Litigation Reform Act of 1095.
Michael J. McKenney: Finally, I wanted to note that when we refer to gap earnings per share, or EPS, and adjusted EPS on this call, we're referring to each of these measures as calculated on a diluted basis. With that, I'll turn the call over to Jeff Powell, who will give you an update on Kadent's business and future prospects. Following Jeff's remarks, I will give an overview of our financial results for the quarter, and we will then have a Q&A session. Thanks, Mike.
Speaker Change: These forward looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation and those discussed under the heading risk factors in our annual report on form 10.
Speaker Change: 10-K for the fiscal year ended December 30, <unk> 2023, and subsequent filings with the Securities and Exchange Commission.
Michael Mckenney: In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today.
Michael J. McKenney: In addition, any forward looking statements we make during this webcast.
Michael J. McKenney: At present, our views and estimates only as of today.
Michael Mckenney: While we may elect to update forward-looking statements at some point in the future, we specifically disengage, disclaim any obligation to do so, even if our views are estimates change.
Michael J. McKenney: While we may elect to update forward looking statements at some point in the future. We specifically disclaim disclaim any obligation to do so even if our views or estimates change.
Michael Mckenney: During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with general dates of the accounting principles. A reconciliation on non-GAAP financial measures to the most directly comparable GAAP measures is contained in our second quarter earnings press release and the slides presented on the webcast and discussed in the conference call, which are available in the investor section of our website at www.caden.com. Finally, I wanted to note that when we refer to gap earnings press share, or EPS and adjusted EPS on this call, we're referring to each of these measures as calculated on a diluted basis.
Michael J. McKenney: During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is contained in our second quarter earnings press release, and the slides presented on the webcast and discussed.
Michael J. McKenney: And the conference call, which are available on the investors section of our website at Www Dot Cadent Dot com.
Michael J. McKenney: Finally, I wanted to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call we're referring to each of these measures as calculated on a diluted basis.
Jeff Powell: With that, I'll turn the call over to Jeff Paul, who will give you an update on Caden's business and future prospects.
Speaker Change: With that I'll turn the call over to Jeff Powell, who will give you an update on cadence business and future prospects. Following Jeff's remarks, I'll give an overview of our financial results for the quarter and we will then have a Q&A session Jeff.
Michael Mckenney: Following Jeff's remarks, I'll give an overview of our financial results for the quarter, and we will then have a Q&A session.
Jeff Powell: Jeff, thanks, Mike.
Jeffrey L. Powell: Thanks, Mike. Hello, everyone.
Jeff Powell: Hello, everyone. Thank you for joining us this morning to review our second quarter results. We discussed that through our business outlook for the second half of 2024. I'll begin by reviewing our operational highlights for the second quarter. I'm pleased to report we had another well-executed quarter. With record demand for aftermarket parts, combined with strong capital business leading to record revenue, record adjusted Ebedaw, and record adjusted EPS. Our acquisitions made in the first half of the year are performing well, and integration efforts are on track. Over all market demand, particularly in North America, remained solid in the second quarter across all operating segments.
Jeffrey L. Powell: Thanks, Mike Hello, everyone.
Jeffrey L. Powell: Thank you for joining us this morning to review our second quarter results.
Michael J. McKenney: Our business outlook for the second half of 2024.
Jeffrey L. Powell: Thank you for joining us this morning to review our second quarter results. And this is our business outlook for the second half of 2024. I'll begin by reviewing our operational highlights for the second quarter. I'm pleased to report we had another well-executed quarter with record demand for aftermarket parts combined with strong capital business leading to record revenue, record-adjusted EBITDA, and record-adjusted EPS. Our acquisitions made in the first half of the year are performing well, and integration efforts are on track. Overall market demand, particularly in North America, remains solid in the second quarter across all operating segments.
Jeffrey L. Powell: I'll begin by reviewing our operational highlights for the second quarter.
Speaker Change: This report we had another well executed quarter with record demand for aftermarket parts combined with strong capital business, leading to record revenue record adjusted EBITDA and record adjusted EPS.
Michael J. McKenney: Our acquisitions made in the first half of the year performing well and the integration efforts are on track.
Michael J. McKenney: Overall market demand, particularly in North America remained solid in the second quarter across all operating segments.
Jeffrey L. Powell: Turning next to slide six, I'd like to review our Q2 financial performance. We achieved a number of financial records in the second quarter, driven by our recent acquisitions and strong capital shipments. Revenue increased 12% to a record $275 million, while organic revenue, which excludes acquisitions and the impact of foreign currency translations, was $250 million. Strong execution contributed to a record-adjusted EBITDA of $62 million and represented a record 22.5% of revenue in the second quarter. Record aftermarket parts revenue, combined with strong performance and capital shipment, contributed to the solid margin expansion of 150 bases. Our adjusted EPS was also a record, at $2.81.
Speaker Change: Turning next to slide six I'd like to review, our Q2 financial performance.
Jeff Powell: At the end of the year. The record of $62 million represented a record 22.5% of revenue in the second quarter. Record aftermarket parts revenue, combined with strong performance and capital shipments, contributed to the solid margin expansion of 150 basis points. Our adjusted EPS was also a record at $2.81. Despite sluggish industrial demand in Europe and Asia, second quarter bookings increased 17% compared to the same period last year. Organic bookings were up 5% and in line with our growth expectations. We have a healthy backlog and expect bookings in the second half of 2024 to be comparable to the first half of the year.
Michael J. McKenney: We achieved a number of financial records in the second quarter, driven by our recent acquisitions and strong capital shipments.
Michael J. McKenney: Revenue increased 12% to a record $275 million, while organic revenue, which excludes acquisitions and the impact of foreign currency translation was $250 million.
Michael J. McKenney: Strong execution contributed to a record adjusted EBITDA of 62 million and represented a record 22, 5% of revenue in the second quarter.
Michael J. McKenney: Record aftermarket parts revenue combined with strong performance in capital shipments contributed to the solid margin expansion of 150 basis points.
Michael J. McKenney: Our adjusted EPS was also a record at $2 81.
Jeffrey L. Powell: Despite sluggish industrial demand in Europe and Asia, second quarter bookings increased 17% compared to the same period last year. I'll provide more detail on this when I review our operating segments. I will begin with our flow control segment.
Michael J. McKenney: Despite sluggish industrial demand in Europe, and Asia second quarter bookings increased 17% compared to the same period last year.
Speaker Change: <unk> bookings were up 5% and in line with our growth expectations.
Speaker Change: We have a healthy backlog and expect bookings in the second half of.
Speaker Change: 2024 to be comparable to the first half of the year.
Jeff Powell: Capital project activity remains good, but the timing of these orders is less certain.
Speaker Change: Capital project activity remains good but the timing of these orders so that's certain.
Jeff Powell: I'll provide more detail in this when I review our operating segments. I will begin with our flow control segment. As you can see on slide seven, our flow control segment had solid bookings in the second quarter of 2024. We benefited from strong aftermarket demand and contributions from our DSTI acquisition. Organic bookings were up 5%. Revenue in the second quarter declined 4% from the previous period record of 96 million, as business activity was dampened by weaker manufacturing activity in Europe and China. Our aftermarket parts revenue remained strong in the second quarter and made up 72% of total revenue.
Speaker Change: I'll provide more detail on this when I review, our operating segments.
Speaker Change: I'll begin with our flow control segment.
Speaker Change: As you can see on slide seven our flow control segment had solid bookings in the second quarter of 2024.
Speaker Change: We benefited from strong aftermarket demand and contributions from our <unk> acquisition.
Jeffrey L. Powell: Organic bookings were up 5%. The integration of DFTI, which was acquired at the beginning of June, has been going well, and we are honored to have this leading producer of fluid rotary unions and related flow control products now a part of Kadant.
Speaker Change: Organic bookings were up 5%.
Speaker Change: Revenue in the second quarter declined 4% from the previous <unk>.
Speaker Change: <unk> record of $96 million as business activity was dampened by weaker manufacturing activity in Europe and China.
Speaker Change: Our aftermarket parts revenue remained strong in the second quarter. It made up 72% of total revenue.
Jeff Powell: Solid operating performance led to an adjusted EBITDA margin of 29.2%. The integration of DSTI, which was acquired at the beginning of June, has been going well. We are honored to have this leading producer of fluid rowing unions and related flow control products now a part of Cadence. As we look ahead to the second half of 2024, we expect demand to follow this historical pattern and moderate slightly in the second half. As many of you know, the first half of the year is typically our strongest in terms of bookings as our customers prepare for and execute annual spring maintenance shutdowns.
Speaker Change: Solid operating performance led to an adjusted EBITDA margin of 29, 2%.
Speaker Change: The integration of the STI, which was acquired at the beginning of June has been going well and we are honored to have this leading producer of fluid rotary unions and related flow control products now a part of cadence.
Speaker Change: As we look ahead to the second half of 2024, we expect demand.
Speaker Change: All of this historical pattern and moderate slightly in the second half.
Jeffrey L. Powell: As many of you know, the first half of the year is typically our strongest in terms of bookings, as our customers prepare for and execute annual spring maintenance shutdowns. Bookings also benefited from our recent acquisition and were up 22% compared to the second quarter of last year. Organic bookings were up 5%, and strong operating leverage boosted adjusted EBITDA margin by 350 basis points to 25.7%. In our material handling segment, we achieved record revenue of $68 million in the second quarter with solid contributions from our acquisition of KWS, a leading manufacturer of screw conveyors and related bulk material handling equipment.
Speaker Change: As many of you know the first half of the year is typically our strongest in terms of bookings as our customers prepare for and execute annual spring maintenance shutdowns.
Jeff Powell: Overall, the fundamentals of our end markets remain healthy, and we are well positioned to capitalize on new products and opportunities. Our industrial processing segment benefited from our acquisition of key knife completed in the first quarter, as well as the strong bookings performance in prior quarters, leading to record second quarter revenue of 115 million, up 28% compared to the same period last year. Organic revenue was up 13% that by growth and our wood processing product line. Bookings also benefited from our recent acquisition and rupt 22% compared to the second quarter of last year. Organic bookings were up 5%.
Speaker Change: Overall, the fundamentals of our end markets remain healthy.
Speaker Change: And we are well positioned to capitalize on new products and opportunities.
Speaker Change: Our industrial processing segment benefited from our acquisition of <unk> completed in the first quarter as well as the strong bookings performance in prior quarters, leading to record second quarter revenue of $115 million up 28% compared to the same period last year.
Speaker Change: <unk> revenue was up 13% led by growth in our wood processing product line.
Speaker Change: Bookings also benefited from our recent acquisition and were up 22% compared to the second quarter of last year.
Speaker Change: Organic bookings were up 5%.
Jeff Powell: Strong operating leverage boosted adjusted EBITDA margin 350 basis points to 25.7%. Looking ahead to the second half of 2024, we expect capital project activity to strengthen across all product lines in this segment. In a material handling segment, we achieved record revenue of $68 million in the second quarter with solid contributions from our acquisition of KWS, a leading manufacturer of screw conveyors and related bulk material handling equipment. After a pockets demand for our high performance billers and bulk material handling equipment was also notable in the second quarter. Bookings in our material handling segment were up 28% compared to the same period last year, due in part to the KWS acquisition.
Speaker Change: Strong operating leverage boosted adjusted EBITDA margin 350 basis points to 25, 7%.
Speaker Change: Looking ahead to the second half of 2024, we expect capital project activity to strengthen across all product lines in this segment.
Speaker Change: <unk>.
Speaker Change: In our material handling segment, we achieved record revenue of $68 million in the second quarter with solid contributions from our acquisition of Kw's, a leading manufacturer of screw conveyors and related bulk material handling equipment.
Speaker Change: After pockets of demand for our high performance Balers in bulk material handling equipment was also notable in the second quarter.
Speaker Change: Bookings in our material handling segment were up 28% compared to the same period last year due in part to the K AWS acquisition. Excluding this acquisition your activity was up 6% led by strong bookings our biller product line.
Jeff Powell: Excluding this acquisition, newer activity was up 6%, led by strong bookings in our bill or product line. The record setting revenue combined with solid execution by our businesses in this segment led to a record adjusted EBITDA margin of 23.2% in the second quarter. We remain encouraged by the number of infrastructure projects underway and additional projects being planned, resulting from the significant amounts of public investment at the federal and state's level. Even though the timing of capital orders can shift, we expect demand in the second half of the year to be comparable to levels we've experienced in the first half.
Jeffrey L. Powell: The record-setting revenue combined with solid execution by our businesses in this segment led to a record adjusted EBITDA margin of 23.2% in the second quarter. As I conclude my prepared remarks, I want to emphasize how pleased we are with the integration process of our recent acquisitions and how our operations teams around the globe are executing strategic initiatives to create and capture more value. Looking ahead to the second half of 2024.
Speaker Change: The record setting revenue combined with solid execution by our businesses in this segment led to a record adjusted EBITDA margin of 23, 2% in the second quarter.
Speaker Change: We remain encouraged by the number of infrastructure projects underway and additional projects being planned resulting from the significant amounts of public investment at the federal and state level.
Speaker Change: Even though the timing of capital orders can shift we expect demand in the second half of the year to be comparable to levels. We've experienced in the first half.
Jeff Powell: As I conclude my prepared remarks, I want to emphasize how pleased we are with the integration process of our recent acquisitions and how our operations teams around the globe are executing strategic initiatives to create and capture more value. Looking ahead to the second half of 2024, the persistent economic headwinds lead us to believe demand for industrial products will be similar to the first half of the year. That said, our backlog is healthy and we are well positioned to capitalize on new opportunities that may emerge as a year unfolds due to our ability to generate strong cash flows.
Speaker Change: As I conclude my prepared remarks, I want to emphasize how pleased we are with the integration process of our recent acquisitions and how our operations teams around the globe are executing strategic initiatives to create and capture more value.
Speaker Change: Looking ahead to the second half of 2024, the persistent economic headwinds lead us to believe demand for industrial products will be similar to the first half of the year.
Speaker Change: That said our backlog is healthy and we are well positioned to capitalize on new opportunities that may emerge as the year unfolds due to our ability to generate strong cash flows.
Jeff Powell: We are raising the low end of our adjusted EPS guidance and expect to deliver strong financial performance again this year.
Speaker Change: We are raising the low end of our adjusted EPS guidance and expect to deliver strong financial performance again this year.
Michael Mckenney: And with that, I'll turn the call over to Mike for reviewing our financial performance in Q2 and our guidance outlook for the remainder of the year. Thank you, Jeff. I'll start with our second quarter performance and some key records. Revenue was a record 274.8 million, up 12 percent compared to the second quarter 23 and up 2 percent excluding acquisitions and FX. Gross margin was 44.4 percent in the second quarter 24. Up 90 basis points compared to 43.5 percent in the second quarter of 23. Excluding a 20 basis point negative impact from the amortization of acquired profit and inventory, adjusted gross margin in the second quarter 24 was 44.6 percent, up 110 basis points compared to the second quarter 23.
Speaker Change: With that I'll turn the call over to Mike.
Mike: For a review of our financial performance in Q2, and our guidance outlook for the remainder of the year.
Mike: Thank you Jeff.
Mike: I'll start with our second quarter performance and some key records.
Jeffrey L. Powell: Revenue was a record $274.8 million, up 12% compared to the second quarter of 2023, and up 2% excluding acquisitions and FX. This included an increase of $8.2 million from our acquisitions, and $1.6 million in acquisition-related costs, partially offset by a $0.5 million favorable foreign currency translation effect.
Mike: Revenue was a record $274 8 million up 12% compared to the second quarter, 'twenty, three and up 2%, excluding acquisitions and FX.
Speaker Change: Gross margin was 44, 4% in the second quarter 'twenty, four up 90 basis points compared to 43, 5% in the second quarter of 'twenty three.
Speaker Change: Excluding a 20 basis point negative impact from the amortization of acquired profit and inventory <unk>.
Speaker Change: Adjusted gross margin in the second quarter 'twenty four was 44, 6% up 110 basis points compared to the second quarter 'twenty three.
Michael Mckenney: This increase was principally due to higher margins achieved on our capital projects in all our segments and especially in our industrial processing segments. Parts and consumables revenue represented 63 percent of revenue in the second quarter 24, compared to 62 percent in the prior year. SG&A expenses as a percentage of revenue. 2, increased to 25.5% in the second quarter of 24, compared to 24.5% in the prior year period, due in part to non-recurring acquisition-related costs. SG&A expenses were 70 million in the second quarter of 24, increasing 10 million compared to 60 million in the second quarter of 23.
Speaker Change: This increase was principally due to higher margins achieved on our capital projects in all our segments and especially in our industrial processing segments.
Speaker Change: Parts and consumables revenue represented 63% of revenue in the second quarter 24, compared to 62% in the prior year.
Speaker Change: SG&A expenses as a percentage of revenue.
Jeffrey L. Powell: Increased to 25, 5% in the second quarter 'twenty four.
Speaker Change: Compared to 24, 5% in the prior year period due in part to non recurring acquisition related costs.
Speaker Change: SG&A expenses were $70 million in the second quarter, 'twenty, four increasing $10 million compared to $60 million in the second quarter 'twenty three.
Michael Mckenney: This included an increase of 8.2 million from our acquisitions and 1.6 million in acquisition-related costs, partially offset by a 0.5 million favorable foreign currency translation effect. Our GAP EPS increased 5% to $2.66 in the second quarter compared to $2.54 in the second quarter of 23, principally due to higher revenue and gross margins. Our adjusted EPS was a record $2.81 in the second quarter of 24, up 11% compared to $2.54 in the second quarter of 23. The second quarter of 24 adjusted EPS exceeded the high end of our guidance range by 31 cents due to higher revenue and better gross margins than forecast.
Speaker Change: This included an increase of $8 2 million from our acquisitions and $1 6 million in acquisition related costs, partially offset by <unk> 5 million favorable foreign currency translation effect.
Jeffrey L. Powell: Our GAAP EPS increased 5% to $2.66 in the second quarter, compared to $2.54 in the second quarter of 2023, principally due to higher revenue and gross margin. The second quarter adjusted EPS exceeded the high end of our guidance range by 31 cents. The adjusted EBITDA margin was also strong in both of these segments, with our material handling segment achieving a record 23.2%.
Speaker Change: Our GAAP EPS increased 5% to $2 66 in the second quarter compared to $2 54 in the second quarter 'twenty three.
Speaker Change: <unk> due to higher revenue and gross margins.
Speaker Change: Our adjusted EPS was a record $2 81 in the second quarter 'twenty, four up 11% compared to $2 54 sites in the second quarter 'twenty three.
Speaker Change: The second quarter 'twenty four adjusted EPS exceeded the high end of our guidance range by 31.
Speaker Change: Due to higher revenue and better gross margins than forecast.
Michael Mckenney: We had record revenue in the second quarter of 24 due to contributions from our current year acquisitions. All of our segments had higher than expected gross margins due to the mix of capital projects in the period. Adjusted EBITDA increased 20% to a record $61.8 million compared to $51.6 million in the second quarter of 23, due to record performance in our industrial processing and material handling segments for both adjusted EBITDA and revenue. The adjusted EBITDA margin was also strong in both of these segments, with our material handling segment achieving a record 23.2%. As a percentage of revenue, adjusted EBITDA was a record 22.5% compared to 21% in the second quarter of 23.
Speaker Change: We had record revenue in the second quarter of 24 due to contributions from our current year acquisitions.
Speaker Change: All of our segments had higher than expected gross margins due to the mix of capital projects in the period.
Speaker Change: <unk> EBITDA increased 20% to a record $61 8 million compared to $51 6 million in the second quarter of 'twenty three due to record performance in our industrial processing and material handling segments.
Speaker Change: For both adjusted EBITDA and revenue.
Speaker Change: The adjusted EBIT margin was also strong in both of these segments with our material handling segment, achieving a record 23, 2%.
Speaker Change: As a percentage of revenue adjusted EBITDA was a record 22, 5% compared to 21% in the second quarter of 'twenty three.
Michael Mckenney: We had a sizeable sequential increase for adjusted EBITDA, increasing 18% compared to the first quarter of 24 due to strong performance in all three segments and especially in our material handling segment due to improve results in our bailing business. Our adjusted EBITDA margin of 22.5% in the second quarter of 24 represents the first time we've exceeded 22%. Turning to our cash flows, operating cash flow increased 25% to 28.1 million in the second quarter 24 compared to 22.5 million in the second quarter of 23. Free cash flow was up 69% to 23.1 million in the second quarter of 24 compared to 13.7 million in the second quarter of 23.
Speaker Change: We had a sizable sequential increase for adjusted EBITDA, increasing 18% compared to the first quarter 'twenty four due to strong performance in all three segments and especially in our material handling segment due to improved results in our <unk> business.
Speaker Change: Our adjusted EBIT margin of 22, 5% in the second quarter of 24 represents the first time, we've exceeded 22%.
Jeffrey L. Powell: Our adjusted EBITDA margin of 22.5% in the second quarter of 2024 represents the first time we've exceeded 22%. Free cash flow was up 69% to $23.1 million in the second quarter of 2024 compared to $13.7 million in the second quarter of 2023. Our other non-operating uses of cash in the second quarter of 2024 included $5 million for capital expenditures and $3.8 million for a dividend on our common stock.
Speaker Change: Turning to our cash flows.
Speaker Change: Operating cash flow increased 25% to $28 1 million in the second quarter 24, compared to $22 5 million in the second quarter 'twenty three.
Speaker Change: Free cash flow was up 69% to $23 1 million in the second quarter 24, compared to $13 7 million in the second quarter 'twenty three.
Michael Mckenney: We paid 59.3 million for acquisitions and borrowed 61.2 million primarily to fund acquisitions in the quarter. In addition, we repaid 25.3 million of our debt obligation. Our other non-operating uses of cash in the second quarter of 24 included $5 million for capital expenditures and $3.8 million for a dividend on our common stock. Let me turn next to our EPS results for the quarter. In the second quarter of 24, GAP EPS was $2.66, and adding back 15 cents of acquisition-related costs, adjusted EPS was $2.81. In the second quarter of 23, both GAP and adjusted EPS were $2.54.
Speaker Change: We paid.
Speaker Change: $59 3 million for acquisitions and borrowed $61 2 million, primarily to fund acquisitions in the quarter.
Speaker Change: In addition, we repaid $25 $3 million of our debt obligations.
Speaker Change: Our other non operating uses of cash in the second quarter 'twenty four included $5 million for capital expenditures and $3 8 million for a dividend on our common stock.
Speaker Change: Let me turn next to our EPS results for the quarter.
Jeffrey L. Powell: In the second quarter of 24, GAAP EPS was $2.66, and adding back $0.15 of acquisition-related costs, adjusted EPS was $2.81. As shown in the chart, the increase of $0.27 in adjusted EPS in the second quarter of 2024 compared to the second quarter of 2023 included increases of $0.20 due to higher gross margin percentage. Looking at our liquidity metrics on slide 15, our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable. Our net debt, that is, debt plus cash, increased $42.7 million sequentially to $270.1 million due to borrowings for our recent acquisitions.
Speaker Change: In the second quarter 2004, our GAAP EPS was $2 66.
Speaker Change: And adding back 15 cents of acquisition related costs adjusted EPS was $2 81.
Speaker Change: In the second quarter 'twenty, three both GAAP and adjusted EPS were $2 54.
Michael Mckenney: As shown in the chart, the increase of 27 cents and adjusted EPS in the second quarter of 24 compared to the second quarter of 23 included increases of 20 cents due to higher gross margin percentage, 20 cents from the operating results of our acquisitions excluding the associated borrowing costs, and 6 cents due to higher revenue. These increases were partially offset by 18 cents due to higher interest expense and 1 cent due to higher operating expenses. The operating results excluding acquisition-related costs from our acquisitions contributed 20 cents to our second quarter earnings. Recent acquisitions are included in each operating segment, and the integration process is going well.
Jeffrey L. Powell: As shown in the chart the increase of 27 and adjusted EPS in the second quarter 24, compared to the second quarter of 'twenty three included increases of 20.
Speaker Change: Due to higher gross margin percentage <unk>.
Speaker Change: <unk>.
Speaker Change: From the operating results of our acquisitions, excluding the associated borrowing costs and six due to higher revenue.
Jeffrey L. Powell: These increases were partially offset by 18 due to higher interest expense and <unk> <unk> due to higher operating expenses.
Speaker Change: The operating results excluding acquisition related costs from our acquisitions contributed 22, our second quarter earnings.
Speaker Change: <unk>.
Jeffrey L. Powell: Acquisitions are included in each operating segment and the integration process is going well there.
Michael Mckenney: There are growth opportunities and synergies that we will work towards capitalizing on as we continue to integrate these acquisitions. Collectively included all the categories I just mentioned was an unfavorable foreign currency translation effect of three cents in the second quarter of 24 compared to the second quarter last year due to the strengthening of the U.S. dollar. Looking at our liquidity metrics on slide 15, are cash conversion days, which we calculate by taking days and receive those plus days in inventory and subtracting days in accounts payable to decrease to 124 at the end of the second quarter of 24 compared to 128 last year.
Speaker Change: There are growth opportunities and synergies that we will work towards capitalizing on as we continue to integrate these acquisitions.
Jeffrey L. Powell: Collectively included all the categories I, just mentioned was an unfavorable foreign currency translation effect of <unk> in the second quarter 'twenty four.
Jeffrey L. Powell: Compared to the second quarter of last year due to the strengthening of the U S dollar.
Speaker Change: Looking at our liquidity metrics on slide 15, our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable to.
Jeffrey L. Powell: <unk> decreased to 124 at the end of the second quarter of 24 compared to 128 last year.
Michael Mckenney: Working capital is a percentage of revenue increased to 18 percent in the second quarter 24 compared to 16.7 percent in the second quarter 23 due to the lack of a full year of revenue in the calculation for our recent acquisitions. Our net debt that is debt less cash increased 42.7 million sequentially to 270.1 million due to borrowings for our recent acquisitions. Our leverage ratio calculated in accordance with our credit agreement increased to 1.22 at the end of the second quarter 24 from 1.12 at the end of the first quarter 24. At the end of the second quarter 24, we had 67 million of committed borrowing capacity and an additional 200 million of uncommitted borrowing capacity under our revolving credit facility.
Jeffrey L. Powell: Working capital as a percentage of revenue increased to 18% in the second quarter 24, compared to 16, 7% in the second quarter 'twenty three due to the lack of a full year of revenue and the calculation for our recent acquisitions.
Jeffrey L. Powell: Our net debt that is debt less cash increased $42 7 million sequentially to $270 1 million due to borrowings for our recent acquisitions.
Jeffrey L. Powell: Our leverage ratio calculated in accordance with our credit agreement increased to 122 at the end of the second quarter 'twenty four from 112 at the end of the first quarter 'twenty four.
Speaker Change: At the end of the second quarter 'twenty, four we had $67 million of committed borrowing capacity and an additional $200 million of uncommitted borrowing capacity under our revolving credit facility.
Michael Mckenney: In addition, our strong balance sheet and low leverage ratio allow us to access additional sources of capital if needed.
Speaker Change: In addition, our strong balance sheet and low leverage ratio allow us to access additional sources of capital if needed.
Michael Mckenney: Now I'll update our guidance for 24. We're raising the low end of our full year revenue guidance by 5 million and now expect 1.45 million to 1.65 million. Million. Similarly, we are raising the low end of our adjusted EPS guidance and now expect $9.80 to $10.05, which excludes 60 cents of acquisition-related costs due to the inclusion of our second-quarter acquisitions. We now expect GAT EPS to be $9.20 to $9.45, revised from our previous guidance of $9.39 to $9.69, which included acquisition-related costs of 36 cents. Our adjusted EPS guidance for $24 reflects our expectation for slightly lower earnings in the second half of the year; that this is primarily due to lower gross margins expected due to the mix of projects and higher interest expense resulting from our acquisition borrowings.
Jeffrey L. Powell: Now I'll update our guidance for 24, which excludes $0.60 of acquisition-related costs due to the inclusion of our second quarter acquisition. Our adjusted EPS guidance for 24 reflects our expectation for slightly lower earnings in the second half of the year. Our 24 guidance, compared to 23, includes an unfavorable foreign currency translation impact of approximately 5.5 million in revenue, a 23 cent decrease from our guidance given at the beginning of the year. And we continue to expect our recurring tax rate will be approximately 26.5% to 27.5% in 2024.
Speaker Change: Now I'll update our guidance for 'twenty four.
Speaker Change: We're raising the low end of our full year revenue guidance by $5 million, and now expect $1 $45 million to $1 $65 million.
Jeffrey L. Powell: Similarly, we are raising the low end of our adjusted EPS guidance and now expect $9 80 to $10 five.
Speaker Change: Which excludes 60 of acquisition related costs due to the inclusion of our second quarter acquisitions.
Jeffrey L. Powell: We now expect GAAP EPS to be $9 20 to $9 45.
Jeffrey L. Powell: Revised from our previous guidance of $9 39 to $9 69.
Jeffrey L. Powell: Which included acquisition related costs of 36.
Jeffrey L. Powell: Our adjusted EPS guidance for 'twenty four reflects our expectation for slightly lower earnings in the second half of the year.
Jeffrey L. Powell: This is primarily due to lower gross margins expected due to the mix of projects and higher interest expense, resulting from our acquisition borrowings.
Michael Mckenney: Our 24 guidance compared to $23 includes an unfavorable foreign currency translation impact of approximately $5.5 million in revenue and $9.00 on adjusted EPS. The unfavorable foreign currency impact represents a 23-cent decrease from our guidance given at the beginning of the year. Future actions by central banks may impact the US dollar and other currencies, which could have a significant impact on our guidance. Our 2024 guidance includes the operating results and associated borrowing costs from our most recent acquisitions completed in the second quarter. Both GAT and adjusted EPS guidance are calculated using our initial estimates of purchase accounting adjustments, which are subject to change as we review and finalize evaluation work for our 2024 acquisitions.
Jeffrey L. Powell: Our 24 guidance compared to 23 includes an unfavorable foreign currency translation impact of approximately $5 $5 million in revenue.
Jeffrey L. Powell: And <unk> on adjusted EPS.
Jeffrey L. Powell: The unfavorable foreign currency impact represents.
20, <unk> <unk> decrease from our guidance given at the beginning of the year.
Jeffrey L. Powell: Future actions by Central banks May impact the U S dollar and other currencies, which could have a significant impact on our guidance.
Jeffrey L. Powell: Our 2024 guidance includes the operating results and associated borrowing costs from our most recent acquisitions completed in the second quarter, both GAAP and adjusted EPS guidance are calculated using our initial estimates of purchase accounting adjustments, which are subject to change as we review and finalize the valuation work for our <unk>.
Jeffrey L. Powell: 24 acquisitions.
Michael Mckenney: Our revenue guidance for the third quarter of 24 is 257 to 269 million, and our adjusted EPS guidance is $2.36 to $2.48, which excludes five cents of amortization expense associated with acquired profit and inventory, and four cents related to acquired backlog. We continue to anticipate gross margins for 24 will be 43.5 to 44.5 percent. We expect recurring SG&A will be approximately 25.8 percent to 26.3 percent of revenue. This excludes acquisition costs of 2.1 million for the first half of 24 and backlog amortization of 2.8 million, including 0.6 million in the third quarter and 0.7 million in the fourth quarter 24.
Jeffrey L. Powell: Our revenue guidance for the third quarter of 'twenty, four is 257% to $269 million.
Jeffrey L. Powell: And our adjusted EPS guidance is $2 36 to $2 48.
Jeffrey L. Powell: Which excludes <unk> <unk> of amortization expense associated with acquired profit and inventory and <unk> related to acquired backlog.
Jeffrey L. Powell: We continue to anticipate gross margins for 24 will be $43 five to 44, 5%.
Jeffrey L. Powell: We expect recurring SG&A will be approximately 25, 8% to 26, 3% of revenue.
Jeffrey L. Powell: This excludes acquisition costs of $2 1 million for the first half of 'twenty, four and backlog amortization of $2 8 million, including $6 million in the third quarter and <unk> 7 million in the fourth quarter of 'twenty four.
Michael Mckenney: We now expect net interest expense of approximately 19 million, and we continue to expect our recurring tax rate will be approximately 26.5 percent to 27.5 percent and 24. And we now expect depreciation and amortization expense will be approximately 48 to 50 million in 24.
Jeffrey L. Powell: We now expect net interest expense of approximately $19 million.
Jeffrey L. Powell: And we continue to expect our recurring tax rate will be approximately 26, 5% to 27, 5% from 24.
Jeffrey L. Powell: And we now expect depreciation and amortization expense will be approximately $48 million to $50 million in 'twenty for.
Michael Mckenney: That concludes my review of the financials, and I'll now turn the call back over to the operator for our Q&A session.
Jeffrey L. Powell: That concludes my review of the financials and I will now turn the call back over to the operator for our Q&A session Josh.
Michael Mckenney: Bye. Thank you.
Operator: As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To with the dryer question, please press star 11 again. One moment for questions.
Jeffrey L. Powell: Yeah.
Jeffrey L. Powell: Thank you 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, one moment for questions.
Ross Sparenblek: Our first question comes from Ross Sparenblek with William Blair. You may proceed.
Speaker Change: Our first question comes from Ross Sparing Black with William Blair You May proceed.
Ross Sparenblek: Hey, good morning, guys. It's morning, Ross.
Speaker Change: Morning, guys.
Ross Sparenblek: Hey, just given the recent M&A, it creates just a sense of what the organic growth was for parts of the symbols in the first and second quarter.
Speaker Change: Good morning Ross.
Speaker Change: Hi, just given the recent M&A, maybe Greg just get a sense of what the organic growth was the price consumables in the first or second quarter.
Speaker Change: On secondary Ross.
Jeffrey L. Powell: Organic.
Jeff Powell: On second, just knowing that all three of those were highly accreted to parts and the growth has been pretty materially or as a boy. I don't have it parsed by parts and consumables. I have it in aggregate. So I'll have to come back to you on that, Ross.
Jeffrey L. Powell: Just knowing that, you know, all three of those were highly accretive to parts, and the grip has been pretty tight.
Speaker Change: Knowing that.
Speaker Change: All three of those were highly accretive.
Speaker Change: Parts and <unk>.
Speaker Change: Material escalate.
Speaker Change: I don't have it parsed by parts and consumables I havent in aggregate.
Ross Sparenblek: Okay, I'll take it off on the words. And then maybe just, you know, given the lumpy start of 2023, if we kind of normalize those bookings, are we to kind of think that this is the run rate and the first half is more normalized, or is anything else to read into that may have affected, you know, the kind of 250 that we stayed up today.
Jeffrey L. Powell: To come back to you on that Ross, Okay, I'll take it offline.
Speaker Change: And then maybe just given the lumpy started 2023, you can kind of normalizes bookings are we kind of think that mission in the run rate in the first half as margins normalize or was there anything else to read into that may have affected that.
Jeffrey L. Powell: End of June.
Speaker Change: We stand out today.
Jeff Powell: Well, I think as we started to talk about, you know, kind of this time last year, we thought that the first half of the year would be similar to the back half of last year and that things might start to accelerate a little bit in the second half. Obviously, the first half of the year has been, you know, it's certainly in North America, it's performed a little better than I think the Fed's thought. And so it's obviously impacted their time being on interest rate cuts and the rate acceleration of the economy.
Speaker Change: Well I think.
Jeffrey L. Powell: As we started to talk about, you know, kind of this time last year, we thought that the first half of the year would be
Jeffrey L. Powell: As we started to talk about kind of this time last year, we thought that the.
Jeffrey L. Powell: First half of the year would be similar to the back half of last year and that things might start to accelerate a little bit in the second half obviously in the first half of the year has been.
Speaker Change: Certainly in North America has performed a little better than that I think the fed's thought and so it's obviously impacted their timing on interest rate cuts and the reacceleration of economy, that's why now.
Jeff Powell: That's why now we're kind of saying we think things are going to be fairly flat, where before we were thinking that maybe we have seen some rate cuts by now and that things would be accelerating a little bit. You know, it's all, as you know, parts have been quite strong. It's really the capital. And there's a lot of activity. There's a lot of projects there. It's just a question of timing. And I think a lot of our customers are waiting for a signal from the Fed that, okay, you know, things have bottomed out and we're going to start to cut rates and we accelerate the economy.
Speaker Change: We're kind of saying, we think things are going to be fairly flat, where before we were we were thinking that maybe we would have seen some rate cuts by now and that things would be accelerating a little bit.
Speaker Change: So as you know parts have been quite strong it's really the capital and Theres a lot of activity is a lot of projects. There. It's just a question on timing.
Speaker Change: And I think a lot of our customers are waiting for a signal from the fed that okay things have bottomed out and we're going to.
Jeffrey L. Powell: Start to cut rates and Reaccelerate the economy. So we're being I think reasonably cautious as we as you know we always are.
Ross Sparenblek: So, you know, we're being, I think, reasonably cautious as we, you know, we always are an outlook for the back half of the year. Yeah, so if we're thinking 25 million of, you know, acquisitions, bookings every quarter, then they applied if everything's flat. The second half is maybe 5% down organically for the year for bookings. Yeah, that's, that's about right, Russ.
Jeffrey L. Powell: Our outlook for the back half of the year.
Speaker Change: Yes, we're taking $25 million.
Speaker Change: Acquisitions bookings every quarter then the implied if everything is flat in the second half is maybe 5% down organically for the year bookings.
Jeffrey L. Powell: Yeah that's.
Ross Riley Sparenblek: Okay, and maybe just one more on bookings if I can. The second quarter on capital equipment was in line with expectations, but it's still probably 40% down probably year to date. So maybe just give us a sense of where that shipped out on price and volume than anything else you hear from customers. I know you noted that industrial processes were set to improve in the second half, which could be a little bit of an outgrowth.
Ross Sparenblek: Okay.
Jeffrey L. Powell: That's about right Ross, Okay, and then maybe just one more on bookings if I can yes second quarter on the capital equipment was inline with expectations.
Ross Sparenblek: And maybe just one more on bookings if I can.
Ross Sparenblek: The second quarter in the capital equipment was in line with expectations, but feels down probably 40% year-to-date.
Ross Riley Sparenblek: But steel is down probably 40% year to date, so maybe just give us a sense of where that shut down on price and volume than.
Jeff Powell: So, maybe just give us a sense of where that shook out on price and volume, than anything else we hear from customers. I know you noted that industrial processes set to improve in the second half, which could be a little bit about growth. So, go back on that, Russ.
Ross Riley Sparenblek: And then anything else you hear from customers I know you noted that industrial processes set to improve in the second half, which could be a little bit about growth.
Ross Riley Sparenblek: So, go back on that, Ross. Are you talking on the bookings front? Yeah, the bookings. It looks like you.
Speaker Change: So go back on that Ross, So you're talking on the bookings front, yes. The bookings. So it looks like you had what equipment was $73 million roughly flat with 77, but you do have some deflationary steel and there since Shanghai since volume.
Jeff Powell: Are you talking on the bookings front? Yeah, the bookings. So, it looks like you had what equipment was 73 million, roughly flat with 77, but we do have some deflationary steel in there. So, it's trying to get sense of volume for the underlying demand. Yeah, I'd say, you know, it's really, it's kind of tied to volume. Okay.
Ross Riley Sparenblek: Yeah, the book. It looks like you had, what, equipment was $73 million, roughly flat was $77, but you do have some deflationary steel in there, just trying to get a sense of volume.
Speaker Change: The underlying demand.
Speaker Change: Yes, I'd say, it's really it's kind of it's tied to volume.
Ross Riley Sparenblek: Yeah.
Ross Sparenblek: So, I'll back in line. Thanks, guys.
Speaker Change: Okay, perfect all right I'll hop back in line. Thanks.
Speaker Change: Thanks, guys.
Operator: Thank you.
Ross Riley Sparenblek: Yes.
Ross Riley Sparenblek: Thank you.
Kurt Yinger: Our next question comes from Tartlinger with DA Davidson.
Operator: Our next question comes from Kurt Yinger with D.A. Davidson. Please proceed.
Eric <unk>: Our next question comes from Eric <unk> with D. A Davidson you May proceed.
Kurt Yinger: You may proceed.
Kurt Yinger: Great thanks and good morning, everyone. I just wanted to start on the Outlook. Can you maybe just talk to kind of the organic performance that's assumed for Q3? And if I think about kind of the DSTI acquisition now rolled in, you know, very modest uplift to the full year outlook, is it fair to still look at that as kind of contemplating very low single-digit kind of organic declines this year? Yeah, I think that's fair. Kurt, you know, in my comments, I had mentioned that from our January forecast to our July forecast for the year, we lost 23 cents due to translation and FX.
Kurt Willem Yinger: Great. Thanks, and good morning, everyone.
Kurt Willem Yinger: Great. Thanks, and good morning, everyone.
Kurt Willem Yinger: I just wanted to start on the Outlook. Can you maybe just talk about kind of the organic performance that's assumed for Q3? And if I think about kind of the DSTI acquisition now rolled in, a very modest uplift to the full-year outlook. Is it fair to still look at that as kind of contemplating very low single-digit organic declines this year?
Speaker Change: I just wanted to start on the outlook.
Kurt Willem Yinger: Can you maybe just talk to kind of the organic performance. That's assumed for Q3, and if I think about kind of the <unk> acquisition now rolled in.
Speaker Change: Very modest uplift the full year outlook is it fair to still look at that as kind of contemplating very low single digit kind of organic declines this year.
Kurt Willem Yinger: Yes, I think that's that's fair Kurt.
Kurt Willem Yinger: Sure.
Kurt Willem Yinger: And my my comment side.
Speaker Change: Mentioned that from our January forecast to our July forecast for the year, We lost 23.
Speaker Change: And due to translation and FX.
Kurt Willem Yinger: And that's, of course, EPS on the top line. We lost about $17 million. So we're fighting a little bit of a headwind there.
Michael Mckenney: And that's, of course, EPS on top line; lost about 17 million. So we're fighting a little bit of a headwind there. Got it.
Speaker Change: And that's of course EPS on top line, we lost about $17 million.
Kurt Willem Yinger: So we're fighting a little bit of a headwind there.
Kurt Yinger: Okay, that makes sense.
Speaker Change: Got it.
Kurt Willem Yinger: Okay.
Jeff Powell: And I guess just going back to bookings, I mean, how would you kind of describe the 2Q performance relative to your expectations? And I guess in terms of kind of potential timing of improvement on the capital side, do you feel like shipments and sales on that front are pretty well spoken for at this point? And what you're seeing kind of over the back half of the year is largely determined how the beginning of 2025 sets up? To your first question, I think the parts were stronger, maybe in the quarter than we expected. And I would say capital was maybe a little weaker.
Speaker Change: Makes sense.
Speaker Change: And I guess, just going back to bookings.
Speaker Change: How would you kind of describe the <unk> performance relative to your expectations and.
Speaker Change: I guess in terms of kind of potential timing of improvement on the capital side do you feel like shipments and sales on that front are pretty well spoken for at this point and what youre seeing kind of over the back half of the year is largely going to determine how the beginning of 2025 sets up.
Speaker Change: To your first question I think the parts were stronger maybe in the quarter than we expected and I would say capital was maybe a little weaker again, just based on the timing of projects.
Jeff Powell: Again, you know, just based on the timing of projects. As far as, you know, capital going forward, I think again, it's the timing of just, you know, when you're in a uncertain time like this, you know, the timing of these things, if they just shift a week or two, of course, can have a big impact. But our smaller capital projects, if we still booked, you know, as we booked those, say in the third quarter, we would still expect to see, you know, some of that, you know, hit the revenue line this year. The bigger projects, of course, some of those are on, you know, kind of can present completion or over time.
Speaker Change: As far as.
Speaker Change: Capital going forward I think again, it's the timing is just.
Speaker Change: When you have when you're in uncertain times like this the timing of these things if they just shift a week or two of course can have a big impact, but our smaller capital projects. If we still booked as we book those say in the in the third quarter, we would still expect to see.
Speaker Change: Some of that hit the revenue line. This year the bigger projects of course some of those are on kind of can present completion or over time, so you'll get some revenue on those but but your point's well taken that as the year progresses.
Jeff Powell: So you'll get some revenue on those. But your points were taken that as the year progresses, that capital booking start to shift more towards those new bookings start to shift more towards next year as they get late into the year. Got it. Okay. That makes sense.
Speaker Change: The capital bookings start to shift more towards those new bookings start to shift more towards next year as they get late into the year.
Speaker Change: Got it okay that makes sense and then just lastly on gross margins it sounded like.
Jeff Powell: And then just lastly on gross margins, it sounded like the performance there on the capital side was better than expected. I mean, was that just kind of a mix of, you know, some of the sizes of projects or what, I guess, operating segments they fell in, or was there anything else that might kind of persist benefiting the margins on the capital side? Well, yeah, both, I would say, both compared to last year and against the forecast, we performed better on our gross margins on capital. And to, you know, overall broadly on gross margins, we've, I'd say the last few quarters against forecast, our gross margins have come in stronger.
Speaker Change: The performance.
Speaker Change: <unk> there on the capital side was better than expected I mean was that just kind of a mix of <unk>.
Kurt Willem Yinger: Some of the sizes of projects or what, I guess, operating segments they fell into. Or was there anything else that might kind of persist?
Speaker Change: Some of the sizes of projects or what.
Speaker Change: Operating segments. They felt one or was there anything else that might kind of persist benefiting the margins on the capital side.
Kurt Willem Yinger: Well.
Speaker Change: Both I would say, both compared to last year and against the forecast.
Kurt Willem Yinger: We performed better on our gross margins on capital. And to, you know, overall, broadly on gross margins, we've, I'd say the last few quarters against forecast, our gross margins have come in stronger. So we're, of course, very, you know, as you recall, we had very good gross margins in the first quarter and strong gross margin performance again here in the second quarter. In the back half of the year, we're looking at gross margins down slightly. But I think that's an area of potential opportunity for us if we can continue to outperform on the gross margin.
Speaker Change: We performed better.
Speaker Change: Our gross margins on capital and to.
Kurt Willem Yinger: Overall broadly and gross margins, we've I'd say last.
Kurt Willem Yinger: A few quarters ago.
Kurt Willem Yinger: <unk> forecast, our gross margins have come in stronger. So we're of course very as you recall, we had very good gross margins in the first quarter and strong gross margin performance again here in the second quarter and the back half of the year, we're looking at gross margins.
Jeff Powell: So, of course, very, you know, as you recall, we had very good gross margins in the first quarter and strong gross margin performance again here in the second quarter. In the back half of the year, we're looking at gross margins down slightly. But I think that's a, that's an area of potential opportunity for us if we can continue to outperform on the gross margin. in front. Okay, and I guess is that just a little bit kind of better pricing management or maybe anything to do with some of the 80-20 initiatives? I would say 80-20 is an important part of what's happening on the gross margin front.
Kurt Willem Yinger: <unk> slightly.
Kurt Willem Yinger: But I think thats.
Kurt Willem Yinger: That's an area of potential opportunity for us if we can continue to outperform on the gross margin front.
Kurt Willem Yinger: Okay, and I guess is that just a little bit of better pricing management or maybe anything to do with some of the 80-20 initiatives?
Kurt Willem Yinger: Okay.
Speaker Change: I guess is that just a little bit kind of better pricing management or.
Speaker Change: Maybe anything to do with some of the 80 20 initiatives.
Speaker Change: I would say 80 20 is a.
Kurt Willem Yinger: Is an important part of what's happening on the gross on the gross margin front.
Jeff Powell: And then when I look at the capital, just looking back against a second quarter of 23, I think the capital margin performance was relatively weak there. And then we came in this quarter with strong performance, so it really, really stood out. Got it.
Speaker Change: And then when I look at capital just.
Kurt Willem Yinger: Just looking back against second quarter of 'twenty three.
Kurt Willem Yinger: I think the capital margin performance was relatively weak there, but and then we came in this quarter with strong performance really really stood out.
Kurt Yinger: Okay, well appreciate the color, guys, and good luck here in Q3. Thank you.
Speaker Change: Got it okay, well I appreciate the color guys and good luck here in Q3.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you.
Gary Prestopino: Our next question goes from Gary Prestopino with Barrington. You may proceed.
Operator: Our next question comes from Gary Prestopino with Barrington. You may proceed.
Gary Frank Prestopino: Our next question comes from Gary <unk> with Barrington, You May proceed.
Gary Prestopino: Hi, good morning, Jeff and Mike. I just have a question on the either down margin, the adjusted either down margin. You know, you attain the record this quarter. Is it possible, given the sales outlook that you have, that you're going to be able to keep it at 22% for the back half of the year?
Gary Frank Prestopino: Hi, Good morning, Jeff and Mike.
Speaker Change: I just have a question on the EBITDA margin the adjusted EBITA margin you attained a record this.
Gary Frank Prestopino: Is it possible, given the sales outlook that you have, that you're going to be able to keep it at 22% for the back half of the year?
Speaker Change: This quarter.
Speaker Change: Is it possible given the sales outlook that you have that youre going to be able to keep it at 22%.
Gary Frank Prestopino: For the back half of the year.
Gary Frank Prestopino: I, you know, I don't think that'll be the case, you know, with, so, you know, I would be, with the margins, gross margins coming down modestly, I think that'll, you know, that'll water down the EBITDA margins accordingly.
Michael Mckenney: I don't think that'll be the case. You know, with, so, you know, I would be with the gross margin coming down modestly. I think that'll, you know, that'll water down the even of margins accordingly. So, okay, it's just that some of the puts and takes here with the interest expense and then, you know, the DNA that you've cited for the year is going to be higher than I expected. So I was just wondering how that would all flesh out, but we should be below that 22% threshold for the back half of the year. Yeah, I think, yeah, and I think we'll, you know, we'll finish out the year, of course, below that mark.
Gary Frank Prestopino:
Speaker Change: I don't think that'll be the case.
Gary Frank Prestopino: So.
Gary Frank Prestopino: No.
Speaker Change: I would be.
Gary Frank Prestopino: With the margins gross margins.
Speaker Change: Coming down.
Speaker Change: Honestly I think that all that.
Gary Frank Prestopino: Water down the EBIT margins accordingly, so.
Gary Frank Prestopino: Okay, it's just that some of the puts and takes here with the interest expense and then, you know, the DNA that you've cited for the year is going to be higher than I expected.
Gary Frank Prestopino: Yeah.
Speaker Change: Okay, and then just some of the puts and takes here with the interest expense and then.
Gary Frank Prestopino: DNA that you've cited for the year is going to be higher than I expected.
Speaker Change: I was just wondering how that will all flush out but.
Speaker Change: We should be below that 22%.
Speaker Change: Threshold for the back half of the year.
Gary Frank Prestopino: Yeah, I think, yeah, and I think we'll finish out the year, of course, below that mark. Okay. Thank you.
Speaker Change: Yes, I think yes, and I think we'll finish out the year of course below that mark.
Gary Prestopino: Okay, thank you.
Speaker Change: Okay. Thank you.
Operator: Thank you. And, as a reminder to ask a question, please press star 11 on your telephones.
Gary Frank Prestopino: Okay.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Walter Liptak with Seaport Research you May proceed.
Walter Lipptack: Our next question comes from Walter Lipptack with Seaport Research. You may proceed.
Walter Lipptack: Hey, thanks. Great quarter, guys. Thanks.
Speaker Change: Okay great.
Speaker Change: Great quarter guys.
Walter Lipptack: Well, one day, one day I asked about the. Just make sure I'm clear on this. The organic orders, I think you said, were across the board up about 5%. Is that right? Yes. Okay, great.
Paul: Thanks, Paul.
Speaker Change: Wanted to ask about the.
Speaker Change: Just make sure I'm clear on this.
Speaker Change: The organic orders I think you said were across the board up about 5% is that right.
Gary Frank Prestopino: Yes.
Jeff Powell: And I wonder if you could just break out how that trended on parts versus capital projects. Yeah, that was, I think, similar to what Ross was asking on. So I would say, you know, it was kind of split between the two. Parts would be the stronger component. Okay.
Speaker Change: Okay great.
Speaker Change: I Wonder if you could just break out how that.
Gary Frank Prestopino: Focused on parts versus capital projects.
Speaker Change: Trended on parts versus capital projects.
Gary Frank Prestopino: Yeah that was I think similar to what Ross was asking on so I would say.
Speaker Change: It was kinda.
Speaker Change: Split between the two parts would be the stronger component.
Jeff Powell: Okay, and then I get to follow up to from that prior question. Just wanted to make sure I understood that in the back half, you're thinking that the orders that we should be expecting would be down about 5%, or was it down that 5% in the back half of the year, but down 5% for the full year? on the, you know, for organic, for the full year. Yeah, that's fairly close. I have a down about 4%. Okay, so that implies that we should be thinking about just the CAPX projects in the back half of the year, just not being as strong because of some of those timing issues or whatever that you talked about.
Gary Frank Prestopino: Okay, and then I guess a follow-up to that prior question, just wanting to make sure I understood that in the back half.
Gary Frank Prestopino: Okay.
Speaker Change: Okay, and then I guess a follow up from the prior question just wanted to make sure I understood that in the back half.
Speaker Change: Youre thinking that the orders that we should be expecting would be down about 5% or was it down.
Speaker Change: <unk>, 5% in the back half of the year, but but down 5% for the full year.
Gary Frank Prestopino: I'm the, you know, for organic for the full year. Yeah, that's fairly close. I have us down about four.
Gary Frank Prestopino: On the.
Speaker Change: For organic for the full year.
Gary Frank Prestopino: Yeah.
Gary Frank Prestopino: Yes, that's fairly close I have is down about 4%.
Speaker Change: Okay. So that implies that we should be thinking about just the capex projects in the back half of the year, just not being strong because of some of those timing issues or whatever that you've talked about.
Jeff Powell: Yeah, you know, we've said I'm the bookings front kind of demand being relatively consistent with where we are currently.
Gary Frank Prestopino: Yes, we had said.
Gary Frank Prestopino: Bookings front kind of demand being relatively consistent with where we are currently.
Gary Frank Prestopino: Okay, and then I wonder if you could talk about sort of the geographic regions and, you know, where the pluses and minuses are, you know, across the three segments.
Jeff Powell: Okay, then I wonder if you talk about sort of the geographic regions and, you know, where, you know, the pluses and minuses, you know, across the three segments. Well, I can talk qualitatively that North America has, of course, held up better than I think most people had expected. China, you know, continues to struggle coming out of the lockdown and some other structural issues they have, frankly, around the drivers of their economy, you know, being principally development. And then Asia's, the rest of Asia, you know, is doing a little better. And then Europe, you know, you've got, you have to kind of look at country by country. You know, I would say, you know, Germany and Holland were problem and UK were probably technically in a recession, I think, and now maybe they're back to being kind of flat.
Gary Frank Prestopino: Okay.
Speaker Change: And then I Wonder if you could talk about sort of the geographic regions.
Gary Frank Prestopino: The pluses and minuses.
Gary Frank Prestopino: Across the three segments.
Speaker Change: Yes, I can talk qualitatively that North America has of course held up better than I think most people had expected.
Speaker Change: China continues to struggle coming out of lockdown and some other structural issues. They have frankly around the drivers of their economy being principally development.
Gary Frank Prestopino: And then Asia.
Speaker Change: The rest of Asia is doing a little better and.
Gary Frank Prestopino: You have to kind of look at it country by country. I would say Germany and Holland and the UK were probably technically in a recession, I think, and now maybe they're back to being kind of flat. The European Bank is trying to cut rates there, so the hope is that as we move into the end of this year and into next year, we'll start to see those economies reaccelerate as the rate cuts continue. Okay, great. Thanks for taking...
Speaker Change: And then Europe, you've got it gets kind of look at it country by country I would say.
Gary Frank Prestopino: Germany and Holland were problem.
Gary Frank Prestopino: U K, we're probably technically in a recession I think and maybe they are back to being kind of flat.
Jeff Powell: You know, the European Bank is starting to cut rates there. So the hope is that we'll, you know, as we move into the end of this year and in the next year, we'll start to see those economies reaccelerate as the rate cuts continue. So that's kind qualitatively kind of what we're seeing. You know, it's kind of been pretty consistent, actually, for the last several quarters. And we think it's going to be for the next few quarters. North America being stronger. North America, of course, being the strongest. Okay, great.
Gary Frank Prestopino: The European Bank is starting to cut rates. There. So the hope is that we will as we move into the end of this year and into next year, we will start to see those economies to reaccelerate as the rate cuts continue.
Gary Frank Prestopino: So thats kind of qualitatively kind of what we're seeing.
Gary Frank Prestopino: <unk>.
Speaker Change: It's kind of it's been pretty consistent actually for the last several quarters and we think it's going to be for the next few quarters.
Gary Frank Prestopino: With North America being stronger.
Gary Frank Prestopino: North America of course being the strongest.
Gary Frank Prestopino: Okay, great. Thanks for taking my questions. I appreciate the input. Thanks a lot.
Walter Lipptack: Thanks for taking my questions. I appreciate the answers. Thanks.
Gary Frank Prestopino: Okay, great. Thanks for taking my questions I appreciate the answers.
Operator: Well, thank you.
Gary Frank Prestopino: Alright, Thanks, a lot.
Gary Frank Prestopino: Thank you.
Ross Sparenblek: Our next question comes from Ross Sparingbuck with William Blair.
Speaker Change: Our next question comes from Ross <unk> with William Blair You May proceed.
Ross Sparenblek: You may proceed.
Ross Sparenblek: Ross, your line is now open.
Ross: Ross Your line is now open.
Ross Sparenblek: Hey, can you guys hear me? There we go.
Speaker Change: Hey can you guys hear me okay.
Jeff Powell: Back on the geographic, I mean, if we can maybe just parse out what the strength has been in North America, then also the second question just on Asia, is it just trying to a couple of years over earning? And we're kind of hitting, you know, run rate. I know the USB business sounds like it's been pretty strong there. And you guys are continuing to outgrow the market.
Speaker Change: Back on the geographic I mean, if we could maybe just parse out what the strength has been in North America and then also second question just on Asia isn't just China, a couple of years over earning and we're kind of hitting run rate I know Steve.
Speaker Change: The business sounds like it's been pretty strong there and you guys are continue to outgrow the market.
Jeff Powell: I just get a sense, you know, what products or businesses directly are driving us? I would say in North America that, you know, all the businesses are doing quite well. Of course, you know, the material handling side, we've had some record performance there. The parts have been very strong on flow control, which, you know, is a very big driver of our business. And all the industrial processing groups done well. So, you know, all the segments have just performed better than the rest of the world because the economy, you know, our growth rates held up more so than the rest of the world.
Speaker Change: Get a sense, what products or businesses directly and driving us.
Speaker Change: Yes, I would say in North America that all the businesses are doing quite well of course, the material handling side, we've had some record performance there.
Speaker Change: Parts have been very strong on flow control.
Gary Frank Prestopino: <unk>.
Speaker Change: It's a very big driver of our business and then all the industrial processing groups done well. So all the segments of just performed better than the rest of the world because economy, our growth rates held up more so than the rest of world.
Jeff Powell: You know, China's got an issue that their personal consumption is down. You know, they focus on exports, which to countries that are soft. And so much of their internal growth would be driven by development, you know, by buildings, frankly. And they overbuilt, and they're trying to sort through that. You know, they've had some of their major developers, you know, declare bankruptcy or be taken over by somebody else. So they're just trying to get their economy back on track.
Speaker Change: China has got it.
Speaker Change: An issue that.
Speaker Change: They're they're personal consumption is down they focus on exports, which to countries that are that are that are soft.
Speaker Change: And so much of their internal growth was being driven by <unk>.
Gary Frank Prestopino: Development.
Speaker Change: Buildings, frankly, and they overbuilt in.
Speaker Change: And they are trying to sort through that they've had some of their major developers declared bankruptcy.
Gary Frank Prestopino: Our be.
Gary Frank Prestopino: Taken over by somebody else. So they're just trying to get the economy back on track I don't think I don't think this is a long term run rate I think they've got some structural issues they've got to work through and then I would expect though.
Jeff Powell: I don't think this is the long-term run rate. I think they've got some structural issues they've got to work through. And then I would expect they'll, you know, the thing should start to improve there a little bit. But it's just taken some time because they were in the lockdown for, you know, substantially longer periods than the rest of the world. And so they're just kind of slower to address their structural issues.
Gary Frank Prestopino: Things should start to.
Speaker Change: Proved they are a little bit.
Speaker Change: But it's taken some time because they were under lockdown for substantially longer periods than the rest of the world.
Gary Frank Prestopino: So just kind of slower to to address the structural issues.
Gary Frank Prestopino: Yeah, well, that makes sense. But I mean, as we think about just the overall decision to replace the lower efficiency mills every year, I mean, you guys still see a good share there. And is that staying on track? I mean, there's
Jeff Powell: Yeah, and that makes sense, but I mean as we think about just the overall decision to replace the lower efficiency, um, nose every year, I mean you guys still see good share there and is that staying on track? I mean there's a nice run right here in some stability, or is it continuing to deteriorate? But taking specifically. You talking about globally or just in China? Just in China. You know, in China our market share is holding up, you know, well there, you know, we've always had kind of ups, you know, 70%, 75% market share and that continues to hold up.
Speaker Change: Yes, no that makes sense, but I mean, as we think about just the overall decision to replace the lower efficiency.
Gary Frank Prestopino: Knows every year I mean, you guys still seeing good share there and is that staying on track.
Speaker Change: A nice run rate here and some stability or is it continuing to deteriorate.
Gary Frank Prestopino: Are you talking about globally or just in China? Just in China.
Gary Frank Prestopino: Specifically.
Speaker Change: Talking about globally or just in China, just in China.
Speaker Change: In China, our market share is holding up well there we've always had kind of about 70%, 75% market share and that continues to hold up they tend to buy as we've talked about many times before they tend to buy in slugs.
Jeff Powell: They tend to buy, as we talked about, you know, many times before. They tend to buy in slugs, you know, so they'll buy a lot of new capacity, they'll put down line, get it up and running and, you know, the smaller and efficient guys will go away. And that's kind of a two-year, three-year cycle, and then they'll buy another slug. And that kind of, that tends to be the way they buy. You know, we're often amazed that they continue, when operating rates are quite low, that they'll continue to add new capacity. As I think I mentioned before, part of that's because it's a big country and transportation costs are starting to become impactful. So then I'll starting to build mills, you know, across the country, closer to the demand so that they can reduce their transportation costs.
Speaker Change: By a lot of new capacity, they'll put online getting up and running in the smaller inefficient guys will go away and so that's kind of a two year three year cycle, and then they'll buy another slug, and so that kind of tends to be the way they buy.
Speaker Change: We're often amazed that there continue when operating rates are quite low that they'll continue to add new capacity as I think I've mentioned before part of that's because it's a big country and transportation cost are starting to become impactful. So they're now starting to build mills.
Speaker Change: Across the country closer to the demand so they can reduce their transportation costs. So youre seeing.
Jeff Powell: So you're seeing, you know, mills start to spread out around the country, but our market share continues to hold up. They're just right now, and I would say in a lower, lower buying period of the cycle.
Gary Frank Prestopino: Ill start to spread out around the country, but our market share continues to hold up there just right now I would say on a lower lower buying.
Gary Frank Prestopino: Is there anything we can look at as like a leading indicator to get a sense of this dynamic of, you know, expansion into the tier two, tier three cities? Just because if you look at customer CapEx, there's only a few guys and it indicates, you know, a pretty big slowdown on the horizon. But that doesn't seem to correlate with the strength you guys are showing.
Jeff Powell: Is there anything we could look at as a leading indicator to get a sense of this dynamic of mill expansion into the tier two, tier three cities? Just going to be looking at customer catbacks. Is only a few guys in the indicates a pretty big slowdown on my rising, but that doesn't seem to correlate with the strength you guys are seeing. Well, it never, you know, it's a funny thing. If you look at the, you know, at the fast markets, which is probably the leading, you know, economic group out there following them, and you look at their, the data they've published over the last 20 years, and you look at what China's done, they always invest more than you would think that the underlying fundamentals would, would indicate.
Speaker Change: Period of the cycle.
Speaker Change: Is there anything we can look at it like a leading indicator to get a sense of this dynamic of mill expansion into tier two tier three cities just kind of if you look at customer Capex is only a few guys in the indication.
Gary Frank Prestopino: Pretty big slowdown in the horizon, but that doesn't seem to correlate with the strength you guys are seeing.
Gary Frank Prestopino: Well, it's a funny thing. If you look at the fast markets, which is probably the leading economic group out there following them, and you look at the data they've published over the last 20 years, and you look at what China has done, they always invest more than you would think the underlying fundamentals would indicate. And that's because of two things: because a lot of these smaller mills do go offline, and it's hard to capture that, you know, these small guys when they go offline.
Speaker Change: It never is.
Speaker Change: Only thing if you look at the fast markets, which is probably the leading.
Gary Frank Prestopino: Economic group out there following them.
Gary Frank Prestopino: And you look at the data as they've published over the last 20 years and you look at what China has done.
Gary Frank Prestopino: Invest more than than you would think that the underlying fundamentals would indicate.
Jeff Powell: And that's because of two things: because there are a lot of these, you know, smaller mills do go offline, and it's hard to capture that, you know, of these small guys in the go-off line. And also it's often driven by concerns about permitting in the future. So, for instance, you know, as they put some of their climate change initiatives in place, these mills get concerned that they don't get the permits and the approval to build now; that it may be more difficult in a few years to do that. And so that's why you see them spreading out in the other parts of the country and securing the permits and starting these projects now, because they believe it's easier now than it might be in the future.
Gary Frank Prestopino: Because of two things because a lot of these.
Gary Frank Prestopino: Smaller mills do go offline and it's hard to capture that.
Gary Frank Prestopino: The small guys and the golf line and also it's often driven by concerns about permitting in the future. So for instance.
Gary Frank Prestopino: And also, it's often driven by concerns about the future of permits. So, for instance, as they put some of their climate change initiatives in place, these mills get concerned that if they don't get the permits and the approval to build now, it may be more difficult in a few years to do so. And so that's why you see them spreading out into other parts of the country and securing the permits and starting these projects now, because they believe it's easier now than it might be in the future. Nobody knows how difficult it may become, but that's one of the rationales that we often hear is that they want to get these things permitted while the environment is still supporting them.
Gary Frank Prestopino: Very helpful. Thanks, guys.
Gary Frank Prestopino: As they put some of their climate change initiatives in place. These mills get concerned if they don't get the permits and the approval to build now it may be more difficult in a few years to do that and so that's why you see them spreading out the other parts of the country and securing the permit to starting these projects now because they believe it easier now than it might be in the future.
Jeff Powell: Nobody knows how difficult it may become, but you know, that's one of the rationales that we often hear: they want to get these things permitted while the environment is still supporting them.
Gary Frank Prestopino: Nobody knows how difficult it may become but that's one of the rationale that we often hear is they want to get these things permitted while the environment still supporting them.
Ross Sparenblek: Very helpful. Thanks, guys.
Speaker Change: Very helpful. Thanks, guys.
Kurt Yinger: Thank you. Our next question comes from Kurt Yinger with DA Davidson.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Kurt Yinger with D. A Davidson you May proceed.
Kurt Yinger: You may proceed. Great. Thanks.
Kurt Yinger: Just one follow-up. If you look back kind of over the last two years, we've seen capital equipment sales outpace capital equipment bookings, which would make sense as you kind of work down the backlog of projects kind of from the 2020-2021 time period. I guess if we look forward and say capital equipment bookings are going to be pretty consistent in that 70 to 80 million range, would you expect a lot of variability still on kind of the sales side, or do you think that would be a relatively good proxy for how to think about the revenue?
Speaker Change: Great. Thanks, just one follow up if you look back kind of over the last two years.
Speaker Change: We've seen capital equipment sales outpaced capital equipment bookings, which would make sense as you kind of work down the backlog of projects from the 2020 2021 time period I guess, if we if we look forward and say capital equipment bookings are going to be pretty consistent.
Speaker Change: That 70.
Speaker Change: $70 million to $80 million range would you expect a lot of variability still on kind of the sales side or do you think that would be a relatively good proxy for how to think about it.
Jeff Powell: No. Well, I think it's a reasonable proximity on the revenue front also.
Speaker Change: The revenue.
Speaker Change: Well I think it's a reasonable.
Speaker Change: <unk> on the revenue front also.
Kurt Yinger: Okay.
Kurt Yinger: Is there anything over the last two years? Okay. Is there anything, I guess, in the last two years, you know, if we were to look at sales on the capital side that would have maybe changed versus the past in terms of, you know, how sales are recognized in conjunction with bookings and timing or anything around that, or do you think it's mostly just kind of that backlog dynamic? The backlog dynamic is playing a big role in what you're seeing on the revenue front.
Speaker Change: Okay is there anything over the long careers that longer term.
Speaker Change: Okay is there anything I guess in the last two years.
Speaker Change: You have to look at bookings versus sales on the capital side that would have maybe changed versus the past in terms of how.
Speaker Change: Sales are recognized in conjunction with bookings and the timing or anything around that or do you think it's mostly just kind of that backlog dynamic.
Speaker Change: The backlog dynamic is playing a big role and what Youre seeing on the on the revenue front.
Gary Frank Prestopino: Okay, I got it. Thanks, Mike. I mean, capital bookings have been, you know, what we would consider to be on the softer side now for several quarters, as when interest rates started to go up. Capital bookings, I would say, last year, certainly from the second quarter of last year, and the first two quarters of this year have been on the weaker side of what we expect, you know, as a normal run rate. So, you know, as I said, we're, I think everybody's waiting for the Fed to declare victory and try to get the economy starting to, you know, reaccelerate.
Kurt Yinger: Okay. Got it.
Jeff Powell: Thanks. I mean, capital bookings have been, you know, what we've considered to be on the softer side now for several quarters, you know, as interest rates started to go up. Capital capital bookings, I would say last year, you know, certainly from the second quarter on last year. And in the first two quarters this year have been on the weaker side of what we expect, you know, as a normal run rate. So, you know, as I said, we're, I think everybody's waiting for the Fed to clear victory and try to get the economy starting to, you know, to reaccelerate.
Gary Frank Prestopino: Okay got it thanks, Mike I mean cabinet bookings have been what we would consider to be on the softer side now for several quarters.
Gary Frank Prestopino: And when interest rates start to go up okay.
Gary Frank Prestopino: Capital bookings I would say last year, certainly from the second quarter on last year.
Gary Frank Prestopino: In the first two quarters. This year have been on the weaker side of what we expect.
Gary Frank Prestopino: Normal run rate so.
Gary Frank Prestopino: As I said I think everybody is waiting for the fed.
Gary Frank Prestopino: Declare victory and try to get the economy is starting to.
Speaker Change: Do we accelerate.
Kurt Yinger: Right. Okay. Makes sense.
Gary Frank Prestopino: Yeah.
Kurt Yinger: Thanks, guys.
Speaker Change: Right, Okay makes sense thanks, guys.
Operator: Thank you.
Gary Frank Prestopino: Yes.
Speaker Change: Thank you.
Walter Lipptack: Our next question comes from Walter Lipptack with Seaport Research.
Operator: Our next question comes from Walter Liptak with Seaport Research. He may proceed.
Speaker Change: Our next question comes from Walter Liptak with Seaport Research you May proceed.
Walter Lipptack: He may proceed. Oh, hey, thanks, guys. You know, maybe as a follow-up to a prior question, you guys started talking about market share. I think in China, but you know, as we think about market share sort of globally and just how you're running the business. You know, I think we all kind of think that because of sort of your, you know, the management of the, of the cadence businesses in the M&A, the 80 20 process. You guys might have more commercial muscle than you did in the past. And so I wonder if you're, if you feel like you're gaining market share in either, you know, for the capital projects or aftermarket.
Walter Scott Liptak: Okay. Thanks, guys.
Speaker Change: Maybe as a follow up to a prior question you started talking about.
Speaker Change: Market share I think in China.
Walter Scott Liptak: As we think about.
Speaker Change: Market share sort of globally, and just how you're running the business.
Speaker Change: I think we all kind of think that because of sort of your.
Speaker Change: Management of the businesses and the M&A. The 80 20 process you guys.
Speaker Change: Might have more commercial muscle.
Walter Scott Liptak: than you did in the past. And so I wonder if you feel like you're gaining market share in either the capital projects or aftermarket.
Walter Scott Liptak: Than you did in the past and so I wonder if.
Walter Scott Liptak: If you feel like you're gaining market share.
Walter Scott Liptak: In either further capital projects or aftermarket.
Jeff Powell: Well, as you know, we have kind of very high market share and most of our markets already. But we, I think we have picked up market share in certain areas. I think on the, certainly on the OSB side. Over the last 10 years, we've picked up substantial market share. You know, we've gotten a bulk of almost all the new orders in the last 10 years. And so our market share and that particular business has improved. As you know, we also introduced new products so that we generate new revenue from, from existing customers. So you're not necessarily picking up market share from a competitor, but what you're doing is you're generating new revenue with a product that didn't exist before that you're selling.
Speaker Change: As you know we have very high market share in most of our markets already.
Speaker Change: But we I.
Speaker Change: I think we have picked up market share in certain areas I think on the certainly on the OSB side.
Speaker Change: Over the last 10 years, we've picked up substantial market share we've gotten.
Walter Scott Liptak: The bulk of almost all the new orders in the last 10 years. And so our market share in that particular business has improved. As you know, we have also introduced new products so that we generate new revenue from existing customers. So you're not necessarily picking up market share from a...
Speaker Change: <unk> of almost all of the new orders in the last 10 years and so our market share in that that particular business has.
Walter Scott Liptak: Has improved as you know we also introduced new products. So that we generate new revenue from from existing customers, So you're not necessarily picking up market share from a.
Walter Scott Liptak: From a competitor, but what youre doing is youre generating new revenue with a product that didn't exist before that you are selling so you'll generate more revenue from those from a given customer so.
Jeff Powell: So, you know, you'll generate more revenue from those from, from a given customer.
Jeff Powell: So, you know, I think it's a combination of both of those things, but, you know, we have very, very high market share and most of our markets already. Okay, how about on the aftermarket side? Is there like a, you know, a programmer process or, or do you think it's just a market that's improved his capital projects or a little slower. No, I think if you look at our R&D, an awful lot of R&D money centers around supporting the aftermarket business, coming out with new aftermarket parts that are performed better, last longer, and give you a better return on your investment.
Speaker Change: I think it's a combination.
Walter Scott Liptak: Both of those things, but we have very very high market share in most of our markets already.
Speaker Change: Okay, how about on the aftermarket side is there.
Walter Scott Liptak:
Speaker Change: Our program of processors or do you think it's just the market that's improved as capital projects.
Walter Scott Liptak: No, I think, you know, if you look at our R&D, an awful lot of R&D money goes into supporting the aftermarket business, coming out with new aftermarket parts that are [inaudible].
Walter Scott Liptak: Lower.
Speaker Change: No I think if you look at our R&D.
Walter Scott Liptak: Awful lot of R&D money is centers around supporting the aftermarket business coming out with new aftermarket parts that are.
Speaker Change: <unk> better last longer.
Walter Scott Liptak: I'll give you a better return on your investment and so that's where a lot of the R&D effort is in.
Jeff Powell: And so that's where a lot of the R&D effort is, and we see the benefit of that as our parts were of new continues to increase. And that is an area where you do have a lot of smaller competitors in there trying to steal that away. So there is opportunity to pick up; as there's opportunity to lose market share, there's also opportunity to pick up market share there as we introduce, you know, kind of continued to innovate and introduce, you know, kind of new products that perform better and give our customers a better return on their investment.
Walter Scott Liptak: And when you see the benefit of that.
Walter Scott Liptak: Our parts revenue continues to increase and that is an area where.
Walter Scott Liptak: You do have a lot of smaller competitors and they are trying to still that away. So there is opportunity to pick up as theres opportunity to lose market share. There is also opportunity to pick up market share there as we introduce and kind of continue to innovate and introduce.
Walter Scott Liptak: You know kind of new products.
Walter Scott Liptak: Perform better and gives our customers a better return on their investment.
Operator: Okay, great, thank you. Thank you, and as a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Jeff Powell: And I would now like to turn the call back over to Jeff Powell for any closing remarks. Thank you, Josh. So before wrapping up the call today, I just want to leave you with a few takeaways. Despite the weaker economic conditions and certain areas of the world, the second quarter was another record-setting quarter, and our operations teams deserve a lot of credit for producing these results. We have strong market positions and expect table demand during the second half of this year as project activity continues to show signs of resilience.
Jeffrey L. Powell: And I would now like to turn the call back over to Jeff <unk> for any closing remarks.
Josh: Thank you Josh.
Speaker Change: Before wrapping up the call today I just want to leave you with a few takeaways.
Speaker Change: The weaker economic conditions in certain areas of the world. The second quarter was another record setting quarter. Our operations teams deserve a lot of credit for producing these results.
Speaker Change: We have a strong market positions and expect stable demand during the second half of this year as project activity continues to show signs of resilience.
Jeff Powell: And with that, I want to thank you for joining us today, and we look forward to updating you next quarter. Thank you.
Michael J. McKenney: With that, I want to thank you for joining us today, and we look forward to updating you next quarter.
Speaker Change: With that I want to thank you for joining us today, and we look forward to updating you next quarter.
Operator: This concludes the conference. Thank you for your participation. You may now disconnect. Thank you.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
Michael J. McKenney: Okay.
Michael J. McKenney: [music].
Michael J. McKenney: Yeah.
Michael J. McKenney: Okay.
Michael J. McKenney: [music].
Speaker Change: Thank you.
Michael J. McKenney: [music].
Michael J. McKenney: Okay.
Michael J. McKenney: [music].
Michael J. McKenney: Yes.
Michael J. McKenney: [music].