Atkore Inc.

Good morning. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to AdCourse Second Quarter Fiscal Year 2025 Earnings Conference Call. All lines have been placed in a listen-only mode. After the speaker, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question again, press star one. As a reminder, this conference is being recorded. Thank you. I would now like to turn the conference over to your host, Matt Klein, Vice President of Treasury and Investors Relations. Thank you. You may now begin.

Thank you, and good morning, everyone. I'm joined today by Bill Waltz, President and CEO, John Deitzer, Chief Financial Officer, and John Pergenzer, Chief Operating Officer, and President of Electrical. We will take questions at the conclusion of the call. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our SEC filings and today's press release which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, any reference in our discussion today to EBITDA means adjusted EBITDA, and any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share or non-GAAP measures. Reconciliations of non-GAAP measures and a presentation of the most comparable GAAP measures are available in the appendix to today's presentation. With that, I'll turn it over to Bill.

Thanks, Matt, and good morning, everyone. We appreciate you joining us today for our fiscal 2025 second quarter earnings call. Starting with our second quarter results on slide three, We are very pleased with our second quarter performance. We achieved net sales of $702 million, which included 5% organic volume growth, driven by strong contributions from construction services, steel conduit, metal framing, and cable management products. Adjusted EBITDA was $116 million and adjusted EPS was $2.04. In addition to our volume growth, our results benefited from better cost management and productivity. While our pricing was down year over year, we saw sequential quarter increases in our prices for our steel conduit products. Our teams have been focused on maximizing shareholder value, which includes assessing the best use for our assets. For example, in February, we announced the divestiture of Northwest Polymers Recycling Business after careful consideration and strategic review. I'm also pleased to highlight that we ratified a new five-year labor agreement with the United Steelworkers at our Harvey, Illinois facility last month. The new contract is retroactive to April 2024, which is when the previous contract expired. This new agreement is a critical element for enabling us to continue building on our commitment to productivity and serving our customers. We redeployed cash to shareholders, having repurchased approximately $50 million in shares in the second quarter and paid our fifth quarterly dividend since adding the dividend to our capital deployment model in FY24. As we announced last week, I'm also proud to highlight that Accor's Board of Directors increased the dividend to $0.33 per share during our recent Board meeting. In mid-April, we announced an impairment charge for certain long-lived assets related to our HDP pipe and conduit products. The impairment charge was triggered by the emergence of competing technologies to fiber optic cable and delays in the deployment of government stimulus funding for nationwide broadband infrastructure investments. The net loss of $50 million includes a $128 million non-cash impairment charge related to these HTPE assets. When we met in February, we had not yet incorporated the impact that tariffs might have on the broader construction market. We indicated that if tariffs went into effect, we expected to be a net beneficiary since most of what we make and sell originates with materials, labor, and equipment in the same geography. Following the elimination of exemptions and other actions taken by the administration, imported steel and aluminum products carry a 25 percent tariff, regardless of the country of origin. As we sit here today, we are more optimistic about demand for U.S.-made steel conduit in 2025. A greater demand for U.S.-made steel conduit helps ACOR. While recent weeks have been encouraging, there remains unpredictability of how long and to what extent tariffs may be part of our economic landscape. We are very mindful of the impact uncertainty has on a macroeconomic level. The most recent Dodge Momentum Index suggested planning activity slowed across several non-residential categories. On balance, we are proud to be maintaining the guidance we presented in February. We continue to expect full-year fiscal 2025 adjusted EBITDA with a midpoint of $400 million. I'm grateful for the dedication and resilience of our teams have shown through a busy first half of the fiscal year. And I'm confident that we will continue to lead into our business system to execute our strategy and deliver value to our customers and shareholders. With that, I'll turn the call over to John to talk through the results from the quarter.

Thank you, Bill. And good morning, everyone. Moving to our consolidated results on slide four. In the second quarter, we achieved net sales of $702 million and adjusted EBITDA of $116 million. Adjusted EBITDA margins expanded sequentially to 16.6% from 15% in the first quarter of fiscal 2025. Adjusted EPS was $2.04. Turning to slide five in our consolidated bridges. Organic volumes were up 5% compared to down 1% in the second quarter of fiscal 2004. Our average selling prices declined 17% year over year, with the majority of the decline coming from our PVC conduit and steel conduit products. However, we were pleased by sequential pricing improvement for our steel conduit products from the first quarter. Moving to slide six, year to date our volume is flat compared to the prior year, having overcome a 5% decline in the first quarter. Last quarter, this slide showed volume growth in only one product area, metal framing, cable management, and construction services. Our 5% year-over-year volume growth in the second quarter was supported by volume growth across three out of five product areas, a meaningful improvement over the first quarter. Near to date, our metal framing, cable management, and construction services have grown high single digits after being up low single digits in the first six months of the prior year. As a reminder, this growth is driven by large construction projects and data center activity, and also due to the high density of metal framing products required for these types of construction. For the first six months of fiscal 2024, our plastic pipe and conduit products were up mid-single digits in volume, driven by strong performance in water-related PVC products. During the first six months of fiscal 2025, electrical PVC conduit serving the commercial and industrial end markets grew while our water-related products declined. This contributed to the overall decline in the product category. As we build out a broader water-related portfolio, we're reviewing our customer base for both new and existing capacity in order to hopefully maximize our value offerings. After our steel-related products were down high single digits in volume in the first quarter, we are pleased that year-to-date volume for these products is now slightly positive. We believe this is due to the strength in the overall market and particular demand for U.S.-made products. Our electrical cable and flexible conduit category is also growing year-to-date, up low single digits. Turning to slide seven, adjusted EBITDA margins compressed in our electrical segment primarily due to pricing declines related to our PVC and steel conduit products, which offset contributions from overall volume growth. Adjusted EBITDA margins improved in our S&I segment due to strong quarterly volume performance from construction services, metal framing, and cable management. In addition, the segment had much improved productivity, contributing approximately $11 million to segment EBITDA. Our productivity gains were primarily due to better cost management in our manufacturing and project-based work. While we are pleased with the operational and financial performance for S&I this quarter, we do believe a certain portion of the benefits and margin gains were isolated to Q2 and anticipate margins to be closer to low double digits for the remainder of the year. Turning to slide eight, we remain committed to executing a balanced capital deployment model with an emphasis on returning cash to shareholders. Our capital investments are largely to support previously announced growth initiatives. Our balance sheet remains in a strong position with no maturity repayments required until 2028. Subsequent to our quarter end, we refinanced our asset-based lending agreement, maintaining our borrowing capacity for $325 million. This amended agreement expires in 2030. While we have historically not borrowed against this facility, it remains an important component of our overall financial profile. Next on slide nine, we expect our Q3 net sales in the range of $715 million and $745 million. Our adjusted EBITDA is expected to be in the range of $85 to $105 million. Our adjusted EPS is expected to be in the range of $1.25, and $1.75. As we've previously discussed, we are accustomed to anticipating some amount of seasonality and generally build in an expectation that the back half of the year will be stronger than the first half. While our second quarter results were better than our initial expectations, there are multiple factors we considered as we plan forward. Our first half of the year was supported by a strong contribution from our construction services business. We expect that the second half of the year will not provide the same contribution due to the number of projects we have in backlog. While there are numerous opportunities we are pursuing for new projects, we expect growth for the construction services business to moderate in the second half of the year. That being said, we are excited about the additional capability and capacity we have for metal framing and cable management products that we believe should help continue to drive growth for this product area for FY25 and beyond. Despite year-to-date increases in both construction starts and planning activities, recent forward-looking construction sentiment suggests the possibility for slower activity moving forward. The topic of tariffs has received much attention in the past several weeks. Forecasting the impact related to tariffs is challenging. We believe the impact of tariffs for ACOR primarily centers on our ability to reclaim and recapture lost market share and gross margin for certain product categories over time. Since tariffs were first announced, both the time horizon and the applicable percentages have changed multiple times. Framing a forward-looking perspective for six months or even three months comes with the risk of inaccuracy. Due to these factors, we believe our volume expectations for the full year will be closer to low single-digit percentages. Nonetheless, as Bill shared, we are maintaining our full-year 2025 outlook and expect full-year adjusted EBITDA in the range of $375 to $425 million, and adjusted EPS in the range of $5.75 and $6.85. With that, I'll turn it over to John Progenzer.

Thanks, John. Moving to slide 10. Although certain product categories source materials from countries impacted by recently announced or potential tariffs, we believe ACOR should be in a net benefit position. While the magnitude and precise details of various tariffs may continue to evolve over the upcoming quarters, this slide illustrates ACOR's geographic manufacturing footprint with its long-lived assets relative to its revenue generation. Additionally, we've outlined the relevant impacts tariffs may create for each of our key product areas. Finally, turning to slide 11, as we've said before, the electrical industry is a great place to be. Our financial profile remains strong and our diverse portfolio of domestically manufactured electrical infrastructure products provide solutions for nearly all types of construction and markets. Our domestic manufacturing footprint paired with our predominantly domestic customer base positions us well to serve our customers in the markets they operate. As demand for electricity intensifies and the design of requirements change, ACQOR is prepared with high-quality solutions to enable growth and ensure safe distribution of electricity to data centers, manufacturing locations, hospitals, and homes. Our products and solutions are situated well with secular tailwinds for increased electrification. We remain focused on a balanced and disciplined approach to capital deployment by returning cash to shareholders through a combination of share repurchases and quarterly cash dividends and investing to grow the business. Through it all, we are guided by our strategy, our process, and our people, the three fundamentals of the ATCOR business system. With that, we thank you again for joining our call this morning. Now, we'll turn it to the operator to open the line for questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Chris Moore, CJS Securities. Please go ahead.

Hey, good morning, guys. Thanks for taking a couple questions.

Good morning, Chris.

Good morning. So maybe we could start with PVC conduits and just kind of what you're expecting for the for the balance of the year I know we we after Q1 kind of the idea was uh would be pre pre pandemic pricing perhaps by the end of fiscal 25. just wanted to see if if that's still in line with the way you're looking at it yeah Chris I think at this stage again as I think John Deutzer said it's hard to predict out three and six months even one month but

what we guided in the last quarter still seems to be our best guess um you know from what we've seen pricing has continued to go down some at least for us um but it's kind of on track back to our earnings and everything we said with what we expect so as much as we can forecast the future for ourselves that's what we are estimating at this stage got it and

What would be, from a market share standpoint on PVC conduit, would you have a best guess in terms of where ATGOR is at this point in time?

I don't know if, Sher, I look to the team for a precise number. I still think we're absolutely a leader out there. You know, imports, which I'm sure will be a question, seem to be continuing to grow. But it's also hard to almost preempt future questions. As the Wall Street Journal talked about the whole economy and saying it's hard to go, you know, the tariff impact is just what's a noise in different product lines. Like, hey, it was up, you know, imports were up solid double digits in the last, let's say, three months. But were people trying to get products in ahead of the tariffs and stuff like that? You know, we're absolutely still a leader. No question about that. And give or take probably around, you know, keeping our same market share. But one of the things I'd also qualify with PVC is unlike other products, it's pure estimates. There's no, all we can do is look at, for example, how much resin is being sold into different markets and try to extrapolate from there. What is municipal pipe, plumbing pipe, PVC pipe. and so forth. So it's much murkier to give precise estimates.

Got it. I appreciate that. And maybe I'll just stay with PVC conduits for my last question. Longer term, I'm talking three to five years. I'm just trying to understand your view of PVC conduits in terms of your overall offering. There's more competition, more imports. Just from big picture, how important is it to the, you know, kind of overall business in the longer term?

I still think it's a key part of our business, Chris. I think a good thing to call out, because I focus on imports, we have mentioned in the past that there's, you know, the startup of one company and it does, well, I say does feel like we're pretty sure that others in the industry, maybe even in municipal pipe and things like that, have expanded some into conduit. But both, you know, it's a good product line for us and it totally fits into Accor's one, you know, one order, one delivery, one invoice, which as we've explained over the years, we think is a competitive advantage for us. So we're, you know, continuing to invest. You know, we talked a lot about productivity. A lot of that came on the S&I side of the business, but we're driving productivity here to continue to be competitive and make it a good product in our portfolio. Perfect. I'll leave it there. Thanks. Yeah. Thanks, Chris.

Your next question comes from the line of David Tarantino from KeyBank. Your line is now open.

Hey, good morning, everyone. Good morning, David. So maybe starting out, could you give us some color what you're seeing more recently in terms of the import levels in both PVC and steel, particularly around the improved metal pricing you guys noted? And then maybe on that, could you quantify what the potential upside in pricing could be? Should these tariffs be more sticky and imports return to more normal levels?

Yeah, I'll start, David. But even in trying to say projections, we get that specific on the future here. As I kind of mentioned with Chris, or I did mention with Chris is, um, PVC imports year over year for the last quarter up, you know, solid double digit percents. It's hard to estimate going forward. If that will continue, or if it's just people getting in before the tariffs or even to go, Hey, we shipped everything we could. And like, they literally don't even have capacity again, I don't know my specific competition domestically or internationally that well to know what's in their playbook. Um, I do perceive that. Again, with all the variability of the administration and tariffs that some imports were coming from China. And I would expect that to be decreased just because the current tariffs there, you know, across, I think all products were China, but at least PVC conduits well over a hundred percent. So that's not as economical. For the Latin American countries, the tariff right now on the major importers is 10%. And again, that's on product. You got to remember a lot of this we've talked about is the inefficiency of freight. So I wouldn't apply it. You know, like their whole delivery cost isn't 10% up because it's just on the product and so forth. So whatever estimate you want to say, 5%, 7%, I'm making up a totally random number, but if you follow my math. But it is a headwind. I mean, it helps us as we've covered in prepared remarks, tariffs overall, and John begins are discussed with one chart are typically a good thing for at-core going forward as for steel conduit, they were actually in the quarter down year over year. So again, just like, I don't want to over-read into PVC. I don't want to over-read, um, into steel, but from a year over year perspective down. there i do think because that is what i think i covered in the very beginning remarks um you know we're seeing for all steel conduit now with 232 where the administration removed exemptions is a 25 tariff so again can it be economical to bring products across yes but that's a higher headwind that either means whatever they do with that but how aggressive they are what pricing they sell at again independent companies but that's a good thing for us and therefore without dimensionalizing an exact dollar where we've held the guide is the fact that we do see tariffs helping ebitda profits a little bit offset as john geitzer said just from the standpoint that um If you look into the second half, it's hard to predict the economy. Good luck to the Fed over the next two days. know we could see some projects delayed association of building contractors and things like that i think there was a stat from them that their contractors were seeing up to 20 percent of jobs delayed or possibly postponed so we were just trying to balance good thing tariffs offset by maybe a little less volume and as john deitzer said and then i'll wrap up my filibuster here is um you know we're still predicting let's say you know, low single digit growth. But if we're at zero in the first half of the year with a good solid Q2, I mean, I'm over specific on that, but if you assume 3%, don't be locked on that number for the full year, implicitly that means 6%, you know, that we will, we expect to be, you know, mid to high single digit growth here in the second half of the year. So we're still pretty optimistic, but that's the balance of tariffs and volume and stuff like that.

Okay. That's helpful. And is there a way to frame that the steel pricing assumption relative to what normal pricing is, or at least pre pandemic pricing is.

No, I don't know. We could go back, but I tell you just like other, well, PBC, but it's jumped around. Like again, if you go back last year through this quarter, Um, we had great steel conduit, like it was growing single digits. Our price year over year was up. And then all of a sudden the market kind of went the other way. It's kind of, you know, again, hard to predict these things. So at this stage is we've called out, um, steel conduit sequentially Q1 to Q2, you know, pricing is up and, you know, things are looking positive, but it's still less than last year, but to go back. I guarantee you there's years it's been higher and guarantee you there's years it's been lower than the current number. So John Dicer.

It's a good question, David. I would say the one dynamic here is the underlying volatility that you do see with whether it's hot rolled steel, cold rolled steel, et cetera. You do see significant volatility with that over time. And that probably has a little bit different of a dynamic versus, hey, how does this compare to a certain pinpoint in time kind of dynamic? I think where we're at today is we are seeing sequential improvement you know essentially month to month as we look forward and so uh there's probably some puts and takes though across as the the entirety of the portfolio as bill mentioned we're probably a little softer on the volume expectation for the second half but that still is a pretty positive one to to build math if we're at flat here in the first half of the year and we're still saying you know, that low single digit type environment, it's pretty positive here from a volume perspective in the back half.

Okay, great. And maybe if I could sneak one more in just to follow up on the volume assumption. Could you just walk us through the approach you guys took to updating the volume assumption, just given the rapid change in the macro backdrop, and maybe give us some color on what you're seeing in the ground in terms of end demand that supports it?

Yeah, I'll start here, David. Again, it's a You wish it was more scientific, but it is a combination of a couple things. First, internally, it is obviously forecast from our general managers, our sales teams on specific projects, as we've explained, other than a couple areas like global megaprojects and some solar business. We are a business that ships typically in four days, so to even have a week's worth of backlog is extreme so we don't have where like other corporations we can look at our backlog for the next year but internally these were submitted forecasts um they do seem to triangulate i'll give you the two thoughts we've done a lot of boy we always do a lot of voice a customer but either directly with myself and my executive staff with you know large customers that are i'm going to say cautiously optimistic even just like we said you know the second half has to be higher single digits That's what they're seeing across, I'll say, most product lines here going forward. And, you know, our sales team has gone out and literally polled, I think, everybody, and they're seeing or estimating the same thing. Flip side of that, just to give us the balances, if you look at things like, and we called out in the prepared remarks, but the Dodge Momentum Index has gone down. The Association or ABI, Architectural Billing Index, has been negative here for almost two years um and i mentioned the abc the association of building contractors that were expecting jobs to be delayed it feels like a good thing from there you can look at as we had in the prepared remark or the chart on page six you know things like metal framing cable management and so forth are doing really well so i know a bunch of our sell side and buy side questions data centers is the one area that's um no surprise i don't think to anybody's really a strong market right now and our products that go into that are doing well and then other things you know really what we see in the market um and so forth there okay great thanks guys well thank you david appreciate the question sir our next question comes from the line of dean troy from rbc capital markets

Your line is open.

Thank you. Good morning, everyone. Hey, good morning. Hey, look, I appreciate all the commentary about limited visibility. That's just the nature of your business, your short cycle business. So I know you have to couch it with that with that condition. But can you size for us? um maybe directionally but any position is helpful of what the net tariff benefit is you're assuming now in your updated fiscal 25 guide uh dean i would just try to do it this way is for the ceo math and john can add to it ceo math by the way is john deitz are making fun of me for high level generalizations is if you took

two or 3% off of volume and looked at our fall through. You could do here how much that is down and then assume it's picked up with the increase in tariffs for the second half. So whatever your estimate, that should get you close. Hopefully that's as precise as I get, but you get it.

Yes, fully understand the limitations here. And then how about just go back to the steel conduit, Mexican imports, real specifically, because that was like the big hot point last year, and maybe a real-time update. Has that flow of product stopped? And any indication, was there any sort of pre-buy that they sent a bigger volume, and how long does that need to work through the system? John?

Yeah, we haven't seen a significant change in the marketplace as it relates to those imports. There was, as Bill mentioned earlier, reduced imports that came in, but it's not that it has completely stopped the inflow of product. Obviously, they have a 25% headwind to deal with going forward, but we'll have to continue to track it and see what comes through in the import numbers.

Great. I would say, Dean, we deny that Oh, Dean, we're not expecting, or at least let's put it this way, I'm not expecting Mexican imports with a 25% tariff to stop, but I would assume most logical people would say, hey, they either would have to be more selective or raise their price, those type of things, and again, how much they absorb in margin versus try to pass through, those are dynamics we can only begin to estimate. But as to your first question, it's a net positive for at-core shareholders.

Understood. And just a last one for me, related to the impairment of HD PVC, what changed competitively? You made a reference about competing products for that market. Can you expand on that and emphasize the impact?

Oh, yeah, I'm glad you asked, Dean, because even in our prepared remarks to make it is so it wasn't our product. So it's not like somebody came out with a new HDP. What we were referring to, because it came in my comments, was competing technology for fiber optics. So more specifically, the covered in the Wall Street Journal, I'm going to forget that I read more than that, by the way, but was articles where the administration was looking to increase the user, open up the funding to satellites. So that's the competing technology. Again, it's all estimates, but at least the one Wall Street Journal article talked about how it could be 20, 50% of the fiber optic. I've seen other CEOs' comments in this space whether they're you know people making conduit or whether they're making fiber optics that it may not be that much and so forth but you know that along with my other prepared remarks on you know just the funding so hasn't gone through yet and things like that but one of the key drivers was the administration we've talked in previous quarters you know people have asked hey could there be you know, satellites and so forth. But that's the difference between speculation and administration now saying they are either have done or plan on adding satellites to the way to get internet to your home.

And just to be clear, the risk of our opportunity for using satellites, was that factored into the impairment? Oh, yeah.

Yeah, that was it. Again, I don't want to say it's the only thing because it absolutely wasn't. And as an engineer with one of your weighted averages, I'm not going to get that precise. But that was a key factor here as the team did their analysis.

That's very helpful. Thank you. Thanks, Dean.

Our next question comes from the line of Chris Dankert from Loop Capital. Your line is now open.

Hey, morning, guys. Thanks for taking the question. You had a quick follow-up on that last point, actually. I mean, I guess, are you getting any direction from the administration on whether it's tariffs or specifically in this case on the BEAD program? I guess it seemed early to be taking an impairment when at least I haven't seen an explicit change to the program. So we're almost preemptively impairing the, like it's, are you getting any actual concrete word from the administration on how they're rolling this out?

No, I'm at least Chris, I'm not aware of a specific other what's been covered in, you know, directors. I know commerce, I think it was the commerce secretary. I could be wrong on which one, but 90% sure. You know, published a press release, wall street journal article, you know, that's where. I'm going to say, Chris, if you look back and say why, you know, it's running the math, making those assumptions, but to go, it's a little bit darn, if you do darn, if you don't to go well, hold it well, nine months from now, we're seeing it. Well, why now? And why not earlier? We'll hold it here as the least, the key inflection point of the administration saying either they had, or at least they intended to open it up. So, you know, we decided to take the prudent action. and take you know run the analysis with our accounting partners and outside you know in different models and thought it was fiscally prudent to take the impairment now yeah i mean by the way yeah yeah yeah go you know i've covered it thanks chris yeah we're still investing but yeah but but that's why

That makes sense. And I think taking the more conservative approach, given the current environment does, does make sense. I just want to make sure that there wasn't something that we were missing on a more concrete basis.

Um, no, no, it's beyond that. Yeah. Or beyond that, Chris, it's like very much like the last quarter with a little bit of a say internal frustration to go, Hey, several states have approved it. And, but even again, what I perceive or what, when I read, as I mentioned earlier, You read other earnings announcements that, you know, whether it's people making fiber optic lines or others making HDPE that are public corporations, you know, everybody still perceives it's, you know, one year out, which is frustrating because it's been one year out for three or four years now. So it just felt like the right thing to do. Balanced internal discussion, third parties, and to your point, took the charge.

Makes sense. Makes sense. And I guess I believe we talked about it in the past around the IRA, but just reconfirming, if we do get any withdrawal of support there for the torque tube business, again, it's want to reconfirm that business is still profitable without the IRA and some of the additional support there as well. Correct.

Yeah, as best as our estimate, Chris, I do it this way to go. If you went back several years ago, I'll look to go. So a couple of thoughts here. One, if you went back a couple of years ago, we started up the solar torque through business before there was an IRA. Um, what the IRA helped with was driving a lot of demand that was coming specifically from China to the States. Um, the counterpoint now is with tariffs on steel. I think we have that, whatever you want to call moat around, you know, that impediment or bringing in as competitively imported steel. Now, what I don't know and can't dimensionalize is how much that tariff or no, excuse me, that solar credit that most of it gets passed on to our customers. How much is that an incentive for them to move faster because they have a lower, like, you know, return on invested capital to start up a solar project. So that level of sophistication, Chris, I can't, I, we don't know. Um, flip side, I would say right now in the solar market, you know the challenges are more things like connecting to the grid I still at least voice the customer here that we talked in our calls I'm sure anyone covering other major electricals where there's a transformer backlog that still seems that be a little bit of an impediment there so I don't think it'd be the major driver but again to be able to say with precision two years out it's hard to say

yeah i agree chris i think there's too much to predict there i would say the hobart operation that we've had where we've invested has made great improvements we talked about some of the productivity gains there that being said we don't comment specifically on the profitability by sub segment um that business has had its challenges though i mean we've talked about that before so you know and then to extrapolate where we go into the future the know i think as we improve that operation continually you know the um you know i think that team is doing a great job and so there's been commercial dynamics though in the near term you can see the volumes in that mechanical tube segment have been uh down year to date so that that's been an impediment to us but you know assuming that market starts to recover um you know i think then we're we're back on track there understood well thanks for the call there guys

Yeah, thanks. Thanks, Chris.

Our next question comes from the lines of Andy Koplowitz from Citigroup. Your line is open.

Good morning, everyone.

Hey, good morning, Andy.

Morning. So can you talk, Bill, about what you saw in terms of the cadence of demand for your products? Last quarter, I think you suggested that Andy Pelster, January came in, you know a little light, but then you already seen sort of improvement in February did that sort of continue. Andy Pelster, into March and April I don't know if you address that earlier.

James Heiting, Norcal PTAC, No good great question Andy and your the supposition is correct or i'll say that going every month was stronger than the previous month so. Um, you know, again, talking to some customers, I hate using, I think once we use the word weather in my seven years here, but I know we're talking to some key customers, their results, they had mentioned that, you know, whether in January and February and stuff and picking it up. So it does feel like Andy, again, our guide is our guide, but, um, every month, you know, what I can say is every month was stronger than the previous month for our fiscal Q2. And again, voice the customers. back to their you know cautiously optimistic with a huge variability out there not knowing you know what the fed's going to do and everything else that you know the rest of the year should be decent on volume for the overall markets and therefore also good for at core and then bill did you size the sort of construction services opportunity in the sense that obviously you've been talking about mega projects and data centers for a while but it seems like you're getting more momentum there now

TAB, You know we used to ask you what your percentage of data Center work was but maybe just of the construction services overall business are more of the projects data centers anything else, and you know how do you expect that to progress moving forward.

TAB, yeah I well I do the following it's data centers and. data centers i think going forward data centers will be the largest portion of it in the past and still in the future is chip manufacturing so obviously there's a different but is there potato potato there to a certain degree purely from the standpoint why are we making so many chips is to support data centers but it's a little above dandy and yeah and the near term bills were

aligned here that we've probably seen more on a product side on a metal framing and cable management um opportunity there on data centers and those have done very well for us moving forward on the services side is probably the opportunity on the data centers that the the past activities probably been more on larger construction projects and then some of the chip manufacturing um facilities that that we've been a part of so i think the data center opportunity is more on on the go-forward basis now for the services element, not just the product side.

Got it. And then I apologize if someone asks you this, but you didn't change your price assumptions for FY25, even with tariffs ramping up on steel in China. Have you seen any material impacts? And you've just got to be kind of careful with pricing right now. It's just interesting that you haven't changed it as the tariffs are starting to ladder in.

Do you want? Yeah, I can start there and then Bill can jump in. There's probably some puts and takes just a little bit of noise around whether it's been the volatility we've seen in copper prices and things like that. So that's independent, I'd say of tariffs specifically, Andy, but we have seen a lot of volatility there that obviously impacts our electrical cable and flexible conduit business. So I'd say there's, there's probably some puts and takes factors as we're evaluating that over the totality of the year. but we still think it's within the range. That range was, you know, I think we had a pretty sizable element, so we still feel like the overall price versus cost dynamics going to land within where we laid out.

Yeah, and if you have a follow-up, I was not understanding if you meant the margin part or the top-line price, because, again, same thing. On a top-line, copper's jumping around a lot of late. Steel costs ran up, I'm saying a lot, directionally 25%, give or take in the first quarter, but it's starting to come down slightly now. So, you know, the top line revenue is our guide with again, estimates of where commodities are going to go. And then net net price versus costs is still within that range that John Deitzer spoke of, you know, more is to question. I think Dean asked probably slight more optimism because again, with the impact of tariffs, we think that's enough to offset maybe a couple hundred basis points of less volume because of the uncertainty in the future markets and so forth there, and markets.

I appreciate the call, Bill.

You're welcome, sir.

This concludes the question and answer session. I would now like to turn the call back over to Bill Waltz for closing remarks.

Thank you. Let me take a moment to summarize my three takeaways from today's discussion. First, Accor had a strong second quarter of financial performance and was active in taking steps to further strengthen our company for the future. Second, we are maintaining our full year 2025 outlook while continuing to monitor the overall market dynamics and competitive landscape. Finally, we remain committed to our capital deployment strategy to create shareholder value over the long term. With that, thank you for your support and interest in our company. This concludes the call for today.

This concludes today's conference call. You may now disconnect.