Encore Wire Corporation

Welcome to the Encore Wire Reports Third Quarter Results Conference Call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press 0, then 1 on your touchtone phone. As a reminder, this call is being recorded. I will now turn the call over to Brett Eckert. Sir, you may begin.

Thank you, Vanessa. Good morning, and welcome to the Encore Wire Corporation quarterly conference call. I'm Brett Eckert, Chief Financial Officer of Encore Wire. With me this morning is Daniel Jones, President, CEO, and Chairman of the Board. In a minute, we will review Encore's financial results for the third quarter ended September 30, 2022. After the financial review, we will take any questions you may have. Before we review the financials, let me indicate that throughout this conference call, we may be making certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation, and instead of attempting to identify each particular statement as forward-looking, we advise you that all such statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed today. I refer each of you to the company's SEC reports and news releases and for a more detailed discussion of these risks and uncertainties. Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful supplemental information for investors, are posted on our website. I'll now turn the call over to Daniel for some opening remarks. Daniel?

Good morning, everyone, and thank you for joining us on the call. and for your interest in Encore Wire. We appreciate your continued investment, confidence, and support. Our ability to quickly convert raw materials into complete delivered orders continues to differentiate us in the market, resulting in exceptional earnings in the third quarter of 2022. Continued persistent tightness in the availability of certain raw materials and the general inability of the sector to meet demand for the timely delivery of finished goods kept spread strong in the third quarter of 2022. Our one location vertically integrated business model affords us the manufacturing scale and flexibility to enhance job site efficiency. By continuing to execute on our core values of providing unbeatable customer service and high order fill rates, we were able to increase both copper and aluminum volumes shipped in the third quarter and year-to-date periods in 2022 over 2021 levels. Copper volumes shipped were also up over second quarter 2022 levels. This marks the third consecutive quarter of total volume growth driven by continued demand for data center, healthcare, and renewable product solutions, among others. I believe our operational agility and speed to market remain competitive advantages in serving our customers' changing needs. Copper unit volumes increased 12.9% on a comparative quarter basis and 7.9% on a year-to-date basis. Comex copper prices decreased gradually throughout the third quarter, while other raw material costs and inputs generally continued to rise. Copper spreads increased 7.3% on a year-to-date basis but decreased 14.7% on a comparative quarter basis. Aluminum spreads and volumes increased for both the quarter and year-to-date periods in 2022 compared to 2021. The gradual abatement of copper spreads in the quarter was more than offset by increased aluminum spreads and an overall increase in total volume shift. we continue to believe Encore Wire remains well-positioned to capture market share and incremental growth in the current economic environment. As we address the near-term challenges, we remain focused on the long-term opportunities for our business, including improving our position as a sustainable and environmentally responsible company in our industry. We believe that our superior order fill rates and deep vertical integration continue to enhance our competitive position. As orders come in from electrical contractors, our distributors can continue to depend on us for quick deliveries coast to coast. I'll now turn the call over to Brett to cover our financial results. Brett.

Thank you, Daniel. Net sales for the third quarter ended September 30, 2022, were $762.4 million, compared to $716.3 million for the third quarter of 2021. Copper unit volume measured in the pounds of copper contained in the wire sold increased 12.9% in the third quarter of 2022 versus the third quarter of 2021. Gross profit percentage for the third quarter of 2022 was 39.3% compared to 37.8% in the third quarter of 2021. The average selling price of wire per copper pound sold decreased 14.4% in the third quarter of 2022 versus the third quarter of 2021, while the average cost of copper per pound purchased decreased 14.1%. As Daniel stated, the gradual abatement of copper spread from the quarter was more than offset by increased aluminum spreads and an overall increase in total volume shift, resulting in the increased gross profit margin in the third quarter of 2022 versus compared to the third quarter of 2021. Net income for the third quarter of 2022 was $191.8 million versus $175.5 million in the third quarter of 2021. Fully diluted earnings for common share were $9.97 in the third quarter of 2022 versus $8.51 in the third quarter of 2021. Net sales for the nine months ended September 30th, 2022 were $2.324 billion compared to $1.905 billion for the nine months ended September 30th, 2021. Copper unit volume increased 7.9% in the nine months ended September 30th, 2022 versus the nine months ended September 30th, 2021. Gross profit percentage for the nine months ended September 30th, 2022 was 37.2% compared to 33.2% for the nine months ended September 30th, 2021. The average selling price of wire per copper pound sold increased 4.3% in the nine months ended September 30th, 2022 versus the nine months ended September 30th, 2021. While the average cost of copper per pound purchased increased 1.5% for the same period. The increase in copper spreads on a year-to-date basis, along with increased aluminum spreads over the same period, coupled with an overall increase in total volume shift, drove the gross profit margin higher in the nine months ended September 30, 2022, compared to the commensurate period in 2021. Net income for the nine months ended September 30, 2022, was $563.8 million versus $399.8 million in the nine months ended September 30th, 2021. Fully diluted earnings per common share were $28.57 in the nine months ended September 30th, 2022 versus $19.31 in the nine months ended September 30th, 2021. Aluminum wire represented 17.4% and 14.7%, respectively, of our net sales in the quarter and nine months ended September 30, 2022. Aluminum wire volumes and spreads have increased for both the quarter and nine months ended September 30, 2022, compared to the commensurate periods in the prior year. Results through the third quarter ended September 30, 2022, were driven by stable demand for our products, and as Daniel said, the general inability of the sector to meet demand for the timely delivery of finished goods. Persistent tightness in the availability of certain raw materials, ongoing global uncertainties, and suppressed availability of skilled labor kept overall spread strong through the third quarter of 2022. This marks the sixth consecutive quarter of elevated margins and spreads. Our balance sheet remains very strong. We have no long-term debt. Our revolving credit line remains untapped. We had $573.6 million in cash at the end of the quarter. During the third quarter, we repurchased 785,747 shares of our common stock. On a year-to-date basis, we've repurchased $1,893,000 769 shares of our common stock for a total cash outlay of $225.2 million. Since the first quarter of 2020, we have purchased over 2.8 million shares of our common stock and an average price of $102.90. We have also declared a $0.02 cash dividend during the quarter. The repurposing of our vacated distribution center to expand manufacturing capacity and extend our market reach was substantially completed in the second quarter of 2002, as previously reported. The increase in 2022. The incremental investments announced in July of 2021 continue in earnest, focused on broadening our position as a low-cost, sustainable manufacturer in the sector and increasing manufacturing capacity to drive growth. Capital spending in 2022 through 2024 will expand vertical integration in our manufacturing processes to reduce costs as well as modernize select wire manufacturing facilities to increase capacity and efficiency and improve our position as a sustainable and environmentally responsible company in our industry. Total capital expenditures were $106 million in the first nine months of 2022 and $118 million for the full year 2021. We expect total capital expenditures to range from $140 to $150 million in 2022, $150 to $170 million in 2023, and $80 to $100 million in 2024. We expect to continue to fund these investments with existing cash reserves and operating cash flows. I will now turn the floor over to Daniel for a few final remarks.

Thank you, Brett. Well done, buddy. Our consistent performance through the first nine months of 2022 further attests to the strength of our one-campus, vertically integrated, low-cost business model, which continues to thrive under current market conditions. I believe this business model remains a competitive advantage, giving us unmatched operational agility and speed to market in serving our customers' evolving needs. Despite persistent tightness and availability of certain raw materials, Our supplier partners continue to deliver on their commitments to Encore. We wouldn't have this level of success without the consistent, exceptional performance of our long-term suppliers. The labor market also remains tight and a limiting constraint for many companies. All of these factors have contributed to the general inability of the sector to meet the demand for the timely delivery of finished goods, which positions us favorably to expand volumes shipped for both the quarter and in year-to-date periods. Looking ahead, we remain solely committed to execute upon the core values of our company, unbeatable customer service, nimble operations, and quick deliveries coast to coast. I want to close by recognizing our employees for their continued hard work and commitment to safety and excellence. Our performance over the past six quarters could not have happened without their extraordinary efforts. Our success in the market continues to allow us the opportunity to incrementally invest in our team as we position Encore as an employer of choice in the sector. I also want to thank our shareholders for their continued support. Vanessa will now take questions from our listeners.

Thank you, sir. We will now begin our question and answer session. If you have a question, please dial 0 then 1 on your touchtone phone. If you wish to be removed from the queue, You can press zero, then two. And if you're using a speakerphone, please pick up the handset first before pressing the numbers. Once again, with your question, please enter the queue by pressing zero, then one. We have our first question from Julio Romero with Sidoti.

Thanks. Hey, good morning, Daniel and Brett.

Good morning, Julio. Yep.

Wanted to start on a residential question. Could you just talk about what percent of sales came from residential in the quarter, and could you speak to maybe what you're seeing in regards to demand on the residential portion of the product portfolio?

Yeah, I'll take the percentage. You know, if you look in the third quarter, you know, residential was 28.3. In the third quarter, 22. If you compare it to the third quarter, 21, it was 28.7. So, you know, if is pretty comparable, as we talked about before, with regard to really what drives our business. And it's not the housing start numbers, but I'll let Daniel comment on the residential market and what he's seen.

Yeah, I mean, there's clearly a slight slowdown in that segment, for sure, but year-over-year numbers still can consistently show to be strong. There still seems to be somewhat of a backlog on some of the other materials building materials it takes to finish some of the houses, you know, creating a little bit of a backlog there maybe in the supply chain side. But, you know, overall, we're still receiving pretty consistent demand and requests for quotes for the residential piece.

Got it. I appreciate that color. And You guys touched on this last call in July. You're able to flex your manufacturing capacity for residential products towards other product categories if need be. I guess you have not started to do that at all in the third quarter yet.

Yeah, we had some of that for sure. It changes based on the complexion of the orders coming in. The majority of The demand that comes in from distribution or the request for quotes are custom lists of materials. It's not like a repeat list that you pull off the shelf and ship. There's clearly for us that opportunity to flex within the product categories and then also share from one plant to the other on the input side for the raw materials as long as You know, we're meeting that service level that we can. We'll continue to do it on the finished goods side.

Got it. And then just turning to the aluminum portion of the portfolio, just could you compare the trend line you're seeing in aluminum spreads versus copper spreads? And, you know, you've talked about a gradual abatement in copper spreads going forward. Do you see aluminum spreads following a different trajectory sequentially?

Great question, Julio. You know, as we talked about, you know, I said for six quarters now, I thought that copper spread peaked in the second quarter of 2021. I stand by that. You know, obviously we didn't comment on aluminum spread. You saw what happened with aluminum, you know, in the second quarter. You know, we've seen consistent growth in aluminum volumes and spread throughout this period. And, you know, The challenges from an aluminum standpoint that we saw when copper hit $5 and there were a few more projects heading that way, there's still continued tightness on that side of the market. The utility has taken up a lot of the domestic capacity. You've seen imports increase coming out of China of aluminum, but you're not seeing them fall domestically. And so they're really not coming into this market yet. And so, all in, you know, we've been able to leverage our capacity and footprint here to continue to expand volumes and serve the market. I mean, it goes back to what we talked about before. This single-site manufacturing really positions us very well to adjust to these changing market conditions. We've got a very diverse product portfolio. We've got manufacturing nimbleness. And that affords us the ability to move with the market. And I think this quarter really showed that. you had some tightening in the copper spreads, which we've been talking about, and that tightening was more than offset by an overall increase of total volume shift as well as a continued growth in aluminum spreads, and that resulted in an improved gross margin. So that would be my takeaway from the quarter.

Helpful. Thanks for taking the questions. I'll hop back at the queue. Thanks, Julio. Good questions. Thanks, Cody. Yep.

As a reminder, if you have a question, you can enter the queue by pressing 0 then 1 on your touchtone phone. And we will take our next question from Brent Thielman with DA Davidson.

Hey, Brent. Thanks. Congrats. Congrats on a great quarter again. Thank you. I guess question, look, pricing spreads and margins still really strong here, even as they're You know, more spreads are coming off pretty high levels. It seems like the supply dynamics, particularly for metals, are still pretty tight today. Daniel, I'm just wondering if you can comment on what are the underlying drivers of this sort of gradual abatement in spreads, even with kind of metals so tight. You've got other disruptions, obviously, out there, pretty strong demand environment. And then just also wondering if you're seeing that across all sort of copper product lines, or is it isolated just to select few?

Yeah. You know, without getting into the names or anything, but there's clearly a healthy demand for the entire product line. It moves up and down slightly, and then right when you think it's a little slower, it picks up and We've got a strong industrial segment. The commercial segment has been strong. As Brett mentioned, the aluminum demand has been strong. And not to take anything away from the copper side, there's the pockets that we have some pricing challenges from competitors on the larger size copper cables. the basic stuff that's pretty easy to run through the equipment, which really doesn't surprise me. It's a response in the market for them to, I guess, move some type of pounds or volume or something, and I can't pretend to know what they're trying to do or not do. It makes no sense, but demand is still there. There's More emphasis still through Q3 on the delivery side and the service side than there is on significant pricing pressures from the competition. There's good competitors and there's some that are not as good at doing those things. But again, we're doing our thing. Our model is very resilient for this type of market that we're in. We have a lot of flexibility in our production capacity, as we were talking about earlier. We can flex from one plant to the other. They have a primary purpose, but we've set them all up to be able to support one another and flex with that demand. there's still only a couple of things that sell building wire. It's price and delivery and we spend the majority of our time focused on the delivery side and we're able to charge for that service. We're able to create relationships to move with some of the demand that maybe doesn't go out into the market for bid. We're able to have that repeat business and and share in those successes with those end users and our distributor customers. As we mentioned in the prepared statement, we certainly couldn't do that without the fantastic vendors that we have. It's not that the challenges aren't there on the raw materials. They're certainly there, but we've got relationships that go way back with our suppliers and vendors. We're able to execute really, really extremely well in this market that rewards you for services, which is what we're after.

Yeah. I appreciate that, Daniel. I saw some news out there that some rod mill capacity is getting shuttered in Texas, obviously not yours, but another. I mean, any thoughts on the implications in this type of environment that's already pretty tight?

Yeah, I mean, there's eight or nine rod mills in the U.S. and four or five in Canada and Mexico combined. So, you know, the shape of copper obviously is incredibly important, and it's not just a COMEX story. You know, historically, over the years, you have folks watching COMEX and they try to make a, Business decision on a significant purchase of building wire potentially based on what they think COMEX is doing or is going to do, that's less influential today. It really has moved over toward the shape of the copper and the availability of that shape, driving a lot of the service opportunities that are there for some of those larger jobs and even the day-to-day businesses affected by it. The shape that every wire manufacturer needs to start with being rod, it is significantly tight. Building wire is the biggest consumer, but it's not the only consumer of those shapes. And so, again, the service levels that we're able to provide in the market, we've been able to get materials We've been able to get the right shape at the right time, and our speed to market, once we receive those raw materials, I believe is pretty much unmatched in the industry, and we're able to benefit from that.

Okay. I guess my next question just would be, as you all know, and we're all trying to figure out where margins find themselves from these extraordinary levels and you continue to surpass expectations there. But Daniel or Brett, I guess I'm just wondering if you can comment at least on the capital investment initiatives. I know you're not disclosing exactly what those are just yet, but anything you can share at this point in terms of, you know, what those do for you structurally in terms of contribution to Encore's sort of core margins? In other words, in a steady market environment, can we think about these investments elevating your kind of longer-term normalized profit margin?

Yeah, I mean, it's a great question, Brent. You know, we've always said these CapEx investments are focused on two things. They have to either improve our service model and or take costs out of the system, right? And that's how this place has grown from day one, right? The great example was the repurposing of the old distribution center, right? We really needed incremental capacity, but you had to build a new service center to be able to handle that incremental load. And as we talked about, as we got closer to the finalization of that repurposing, that it was going to add 15% to 20% capacity. As we get closer, these investments we're making really are a combination of deeper vertical integration. It's de-risking some aspects of the supply chain that that we didn't maybe like the profile of as much as others as you navigated through the pandemic in this past 18 to 24 months. And then it's modernization. It's utilizing some of our land that we have here to continue to expand on capacity. We will get closer to what those are, but, you know, when we look at them, those first two things, improving the service model and taking costs out, are really top of our list. And so... More to come on that, you know, from a cash perspective, you saw the growth in the cash balance. $574 million is the cash at the end of September. You know, that year to date, you know, we spent $225 million on share repurchases and $106 million on CapEx. And you still grew cash $135, $140 million. And so you're sitting on $565 million of receivables as of the end of September. And, you know, those balances are all current. And so... You know, it's more of the same as we generate through this, but, you know, from a CapEx standpoint, we tightened the range a little bit for 2022 and left the rest of them unchanged. You know, that's going to be the primary focus. You know, we do have about 1.2 million shares remaining under our share repurchase authorization through March of 2023, and so we'll continue to look to opportunities in the market for that.

Okay. Maybe just last one. I mean, the volume's really healthy this quarter. I imagine Plant 7 isn't contributing a whole lot yet as that ramps up. Correct me if I'm wrong, but Dan, where are you seeing the biggest drivers in terms of underlying kind of demand right now pull for your products?

I think it's the one Daniel mentioned, right? You know, it goes back to the webpage and the slide that we have out there. You know, data centers, renewables, health care, and then some of the incremental investments you're seeing outside just traditional commercial, industrial, and residential. We've definitely seen some accelerated growth in the industrial segment, which leans in well to the repurposed distribution center, and so we're taking advantage of that. We didn't just turn all the lines on all at one time late in the second quarter. We commissioned lines. we started making wire, and it turned from initially a construction site, which was making wire, to a wire plant that had a little bit of construction left. And so we continue to lean in as we ramp up the capacity in that facility, and we'll take advantage of the opportunities we see in the market.

Okay, great. Thank you, guys. Appreciate you taking the time. Great questions. Thanks, Brent.

We have our next question from William Lewis Baldwin with Baldwin Anthony Securities.

Good morning.

I think you probably addressed the question I have, at least to the degree you're willing to talk about it, but I'll go ahead and ask it anyway. I was going to see what kind of color you could offer on the nature of your critical integration CapEx programs. You know, what... what areas, what products, this type of thing, if you're able to offer any color there.

Yeah, you know, it's along the same lines as what we've done in the past. As Brett mentioned, we're specifically after savings and cost opportunities and increasing our service model and Each one of those projects that we have going are heading in that direction. There's a huge consideration here for our sustainability. We're moving in those directions and trying to stay ahead of what is there and take advantage of opportunities that come up in those categories as well. You know, we only have five basic raw materials. We're addressing all of those in any way, shape, or form that we can increase our service or cut into cost or some manner. And at the same time, be very aware of and take advantage of opportunities to improve from a sustainability standpoint. On the product offering side, it's similar products to what we've been offering over the years. There's a few tweaks we can make to be, you know, maybe more important in one market or the other, but we're just posturing ourselves, Bill, as we have in the past to, you know, offer fantastic service from a low-cost, perspective and be ready to take on whichever market presents itself. We've got the cash to do it. We've got the right guy or the right girl with backups identified in key positions and others to take advantage of it. It's really just more of the same. There's some upgrades involved there. We're in year 33 here. We're constantly trying to become more efficient and better through processes that we can find and develop through those experiences that we've built over the years, and we're acting on them. We've got the cash to do it, and we've got the right folks, and the timing is good, and it fits. It's raw materials. It's finished goods. It's distribution. It's truly all the above. You know, this industry... uh, we've, we've talked in the past, um, we fight for pennies in this industry. Um, and just fortunately right now there's nickels out there that we can pick up. So we're, we're accurate. We're getting after it.

Well, there's no question that Daniel, I mean, your strategic and operational execution is, uh, been unbelievable over the years. And, uh, it's just wonderful to see it getting, uh, getting recognized now and you're getting a heck of a return on it. So, uh, I congratulate you and your team for all the hard work over a long, long period of time.

Yes, sir.

Thank you very much. Yeah, it's been very exciting to watch.

Thank you very much.

Just to confirm, sir, do you have any further questions before I release you?

No, no, that's fine. That takes care of me. Thank you.

And thank you. Our next question is from Eric Marshall with Hodges Capital Management.

Morning, Eric. Congratulations on the quarter. Congratulations on the quarter, guys. I appreciate some of the color that you guys gave on what you see going on in the housing market, but can you give us an idea of an estimate on how much of your business this last quarter was residential compared to maybe a year ago?

Sure. Hey, Eric. So, you know, let's look at a couple periods. Third quarter to third quarter, right? So third quarter of 2022, residential 28.3%. Third quarter of 2021, residential 28.7%. So, you know, it's like almost flat. If you look at it from a nine-month comparison, you know, you kind of pick up the meteoric second quarter of last year when it went from meteoric to just kind of hot since then. But you were at 31.7 residential nine months 2021 compared to 29.6 nine months 2022. So, you know, it's pretty slight to change. The last one that I'll kind of give you a little better perspective, let's look at it third quarter from second quarter of this year, right? What's it trending in the most recent period? We talked about 28.3 for third quarter of 2022. If you look at second quarter of 2022, just to remind you, it was 29.9. So, you know, it's pretty gradual, the shift. But you can see from a bottom line standpoint, you know, we continue to just evolve and adapt and take what the market gives us.

Okay. And then when we think about the possibility of the housing market slowing down much more than the – commercial industrial side of your business, does the mix of the type of more highly engineered wire and conduit that goes into the industrial side of your business, does it carry higher margins than residential?

It can. The way that you asked the question, the answer would be yes, if it's highly engineered products. There are standard products on the industrial commercial list offering as well, but again, as we've tried to communicate and highlight even in the press release and on our website, we're not tied to the residential starts number as folks have tried to portray us in the recent past. that production capacity that's in that residential plant, which is the original plant going back to day one, it will be used in other products that go out of here that are considered to be commercial and industrial related.

Okay. And then any comment that you can make on what you guys are seeing out there as far as the physical market for supply and demand for copper. Are there any pockets with copper being so volatile and pulling back here? Are there any excesses out there that you see that could, you know, further disrupt things?

No. You know, copper's up 10 cents today. The volatility is really where the story is. When you get swings of 10, 15, 20 cents during one particular day, And as I mentioned earlier, the shape today has a huge influence on the cost itself. The adders above COMEX that are not published are significantly higher today than they have been in recent years. And so when folks are just watching COMEX, it's certainly part of the story, but it's less important part of the story as the shape and availability of those shapes to run these wire plants. And so the fact that You know, there's been an unbelievably tight market on the shape of rod that feeds wire plants. I mean, the last time it was this tight was probably 95, 96 timeframe when there was this type of, you know, lack of availability of rod to feed these wire plants. We've seen letters from competitors go out declaring that they couldn't get rods, so they were going to back out of the market for a specified time frame. So there's just a lot around that copper piece to unpack. And when you look at what projects are out there to help, if that's the right term, with that tightness or alleviate some of the tightness in the market, they're just not there. It's a... It's a pretty long, drawn-out process to get ready to do your own. Again, the copper vendors specifically to the raw material, if you're speaking of that availability, any report can support either conclusion, I guess, but there's just no copper out there that's extra, and you know what happens next. with these electric vehicles on copper consumption, and you know what happens with companies that are going green with copper consumption, and you can read what happens to copper when there's onshoring and reshoring of manufacturing. There's quite a few things on the consumption demand side for copper, and there's just not any significant contributing supply side projects that are out there.

With the Texas rod mill that was shuttered and the dollar being so strong, have we seen any imports of rod come in at all?

No, not that I'm aware of. I mean, other than Canada and Mexico.

Okay. All right, that's all I have. Thanks, guys.

You bet. Thanks a lot, Eric.

The next question is from Brian Gibson with Raymond James.

Good morning, Daniel and Brad. Hey, this is mainly a complimentary call, but I do have one question or actually two questions. But, you know, Daniel, you've said for years we're not going to get bigger and poorer. and you're certainly getting bigger, and you're not getting poorer. So congratulations on how you guys run the business. I love the buybacks. I love investing in your infrastructure, investing in your buildings. That's wise. It's good business for people to be doing that. About five questions. quarters ago, you said, hey, business is going to normalize. We don't know if it's going to be quick or if it's going to be gradual. You said that for a couple, three quarters. And then a couple quarters ago, you said, hey, we can see signs now where business will normalize gradually. Do you still think that? It is correct.

yeah so you look at this I think you really take that out if you look at the last two quarters right last two quarters gross margin has actually gone up right and so as I said earlier in the call we saw copper spreads peak in June of 21 right and we saw gradual abatement as you went through there and that's the million dollar question how long has this happened and does it you know everyone worries you're going to fall drive off a cliff and and As you look at this, you look at the resiliency of the business now over the last 15 months, right? Margins are higher. Your gross margin is higher today than it was at that point in time. And it just shows, I think it shows a lot about that resiliency which you saw this quarter. We saw copper spread abatement in the quarter, right? Still up on a year-to-date basis, but you saw some abatement occur in this quarter, in the quarter in which gross margin went up. Total volume shift continued to increase. That was a contributing factor of the overall increase, as well as continued strength in the aluminum spreads. And so I think you take from that what you will. Copper remains very, very tight. As Daniel talked about, the metal is the tightest it's ever been, even through the pandemic. And the shape has never been tighter. You still got to figure out some things with regard to Russian metal. Does it go into LME next year or not? You know, probably half to 60% of the inventory at LME today is Russian. And so they're going through a poll right now to decide what to do for next year. But, you know, if that doesn't go in, that's going to cause some disruption. It's not a big percentage. It mainly goes to China, but that'll send China to South America, which goes domestic. And so, and which pulls on ocean freight and ocean barge and port congestion and you can kind of play it out. So it remains very, very tight, Brian, as you go through this.

Yeah. Okay. Yeah. Yeah. I just wonder, you know, nothing stays the same forever, you know, in a year and five quarters ago, you had this explosive earnings and it's just stayed there. It's gone up, you know, it's gone up. So, uh, uh, but with the, you know, putting the, you know, buying back the shares and, and, you know, putting money into your infrastructure should certainly help in the future. Uh, I think I heard you say, Daniel, that we have – how do I want to say this? You said people are not – we're not putting – we're not even – some jobs we're not even bidding. They just call in and say, get us the stuff. Is that pretty much what you said there, that you're not even – and some jobs you're not even bidding, you're just filling orders?

No, no, no. They don't go out to the traditional – path of putting it out to two or three vendors to bid on it. We certainly have to, uh, you know, be attentive to demand and customers request for quotes, no question, but we do have repeat business that doesn't go out to four or five competitors to be, you know, take shots at or cut prices.

Okay. Yeah. So yeah, yeah. You still got to bid it, but, uh, it's not going out. They're just saying, we're going to, we're, you know, give us your price and, and, uh, Is that normal too or is it just because you guys have the product to supply the jobs?

We've always had a pretty decent track record attempting to keep things from being bid by competitors where they can have a chance to cut the price. It's a testament to Our employees here, our sales office is doing a great job, and operations is doing a great job, shipping is doing a great job. You do the things you're supposed to do and treat folks fairly. You know, they're less inclined to go out to shop it around if you're taking care of business. And so to say that it's normal or abnormal, you know, I consider it to be somewhat normal.

Okay. Well, hey, thanks for your time, guys.

You bet. Thanks, Brian.

Once again, if you have a question, you can queue up by pressing 0, then 1. Our next question is a follow-up question from Julio Romero with Sedoti.

Hey, thanks for taking the follow-up. One more on CapEx. Just given the expansion you've undertaken, given the all the reinvestment. Just a quick refresher on what annual maintenance CapEx looks like these days.

Yeah, great question, Julio. It's still around $40 to $60 million, and that $40 to $60 million in maintenance CapEx is typically incremental machinery and equipment, but that's kind of your annual run rate. Those numbers are embedded within our CapEx estimates, but I still think it's in that range as you get back to a normal investment level at some point.

Great. I appreciate it. Thanks very much.

Thanks for the support.

Thank you. I have no further questions in queue at this time.

Perfect. Thank you so much, everyone. I appreciate your attendance today and enjoy your day. Thank you.

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