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spk04: Good morning, ladies and gentlemen, and welcome to AVN Corporation's webcast to discuss the company's fourth quarter 2021 results. My name is Carmen, and I'll be your operator for today. At this time, all participants are in a listening mode. We will have a question and answer session following the company's prepared remarks. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Joe DiSalvo. Vice President, Treasurer, and Investor Relations. Please proceed.
spk09: Thank you, Carmen, and good morning and welcome to our fourth quarter 2021 earnings call. Before beginning, we'd like to remind you that statements made during this webcast may be considered forward-looking statements. Forward-looking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They are based on management's expectation and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forelooking statement. Also, during the discussion today, we will use both GAAP and non-GAAP financial measures. Please refer to the presentation posted on the Aviant website where the company describes non-GAAP measures and provides a reconciliation to their most directly comparable GAAP financial measures. Joining me today is our Chairman, President, and Chief Executive Officer, Bob Patterson. and Senior Vice President and Chief Financial Officer, Jamie Beggs. Now I will turn the call over to Bob for some opening comments.
spk07: Thanks, Joe. Good morning to everyone joining us on the call today. Today we are reporting record fourth quarter results to finish out an incredible year where we delivered our highest level of sales and adjusted EPS in our company's history. Our financial performance reflects the deliberate transformation of our portfolio towards specialty solutions as well as a focus on execution during a very challenging year. 2021 marked our first full year as Avian Corporation. As you know, we selected this new name in July of 2020 following the acquisition of Clarence Color Business, the largest in our history. Avian truly represents who we are today as a specialty formulator of sustainable solutions, and it has served as a galvanizing force in bringing together two world leaders who are truly better together. We finished the year a little better than expected with adjusted EPS of 58 cents for the quarter versus our prior guidance of 54 cents. Many themes from our prior quarter discussions carried forward as we have been able to overcome unprecedented inflation, supply chain disruptions, and workforce shortages to deliver bottom line growth. From a demand perspective, we did see a decline in transportation, primarily in Europe, as well as a decline in sales of outdoor high-performance applications, which we expected. And Jamie will speak to that in a moment when we discuss segment performance and our outlook. For the full year, adjusted EPS was $3.05, an all-time record, and a 58% increase over 2020. We achieved this with sales of $4.8 billion and adjusted operating income of $429 million. Each of our three segments contributed to our results this year with strong double-digit growth across the board. Specialty engineering materials grew operating income 40%, driven by high demand for our composites and other specialty solutions, serving the consumer and healthcare markets. Color additives and inks grew revenue by 18%, and operating income by 34%, Including $54 million in synergies from the Clariant Color integration, the segment expanded operating income to over $300 million for the first time. Distribution achieved significant revenue growth of 47% and operating income expansion of 33%, also to reach record-level performance this year. Notably, healthcare continues to be a significant driver for us and now represents 26% of distribution sales. Our differentiated performance is the culmination of a multi-year strategy to become a truly global specialty formulator. The bridge on slide 7 shows the key drivers of revenue growth and highlights the relative margin contribution of each. You can also see that like many companies, we have experienced significant wage inflation over time to serve our customers and experienced increased costs associated with supply chain disruptions. But as you will see on slide eight, we have more than covered these costs with associated pricing. We are a formulator, and what stands out for me this year about our performance is our ability to execute. And the simplicity of this slide makes everything look easy, but it certainly isn't. The magnitude of these cost increases have been substantial, and so has our efforts to overcome and deliver despite them. And this required constant dedication and collaboration among our entire workforce suppliers, and customers. Our global footprint, flexibility in our operations, and dedicated employees have been a difference maker as we led through these unprecedented times. We have turned these challenges into opportunities as our teams work relentlessly throughout the year to deliver for all our stakeholders. And I want to thank them for their efforts to deliver a record year. Over the years, we have been strategic in how we position our portfolio both in terms of the types of products we create as well as where we sell them. We have focused on specialty applications with advanced performance characteristics and shifted toward end markets that have high growth potential. Not only has this been an important contributor to our recent sales growth, but the benefits of improved mix and clarient synergy capture have meaningfully increased margins despite inflationary pressures. The Clariant color acquisition has been a tremendous success. The business grew our presence in our focused end markets of healthcare, packaging, and consumer, which not only fared well during the pandemic, but also served as key growth areas for us. When we announced the Clariant deal in December of 2019, we were acquiring a little over $130 million of EBITDA. In 2021, which was our first full year of ownership, Clarity and related synergy capture contributed $205 million of EBITDA, a 54% increase. Margins have expanded 400 basis points. And when you look at the purchase price multiple, you can see tremendous return on investment with more to come. The integration has exceeded our high expectations with respect to how well our two teams have come together. This has enabled us to accelerate the pace and level of synergy capture. And for those of you who participated at our investor day in December, we provided an update to our anticipated cost synergies, which we now expect to approximate $85 million. And these are just the cost synergies. We are even more excited about the revenue synergies yet to come as we continue to integrate our commercial teams. The shared passion for solving our customers' toughest material issues material science challenges is becoming more and more apparent every day. And this really is at the heart of what we mean when we say better together. These material challenges continue to evolve. And historically, the questions like how do I make my product stronger or lighter or both, or how do I advance shelf life with additives and improve shelf appeal with colorants remains. However, we now get one more question, which is always, how do we do these things while at the same time improving the sustainability of our products? For us, we have invested heavily in sustainable solutions, and it's been the fastest growing part of our business over the last five years. Lightweighting has been a huge contributor to that growth. And when we say that, oftentimes you think transportation, and that's true. However, lightweighting has also been very important in growing and a growing role in packaging. Eco-conscious materials have also grown tremendously as we help our customers use more recycled content and or improve the recyclability of their products. There are eight primary ways utilizing science, design, and formulation that we help customers with their sustainability goals. And in 2021, our sustainable solutions portfolio grew 16% over the prior year. and now account for nearly 30% of color and engineering materials segment sales. We would not be able to share this kind of success with you if it was not for our culture. As a leadership team, we firmly believe that culture is everything. It's the driving force behind our record financial performance, and I'm proud to report that we received our third consecutive Great Place to Work certification in December. Our global associates have built a truly exceptional culture here at Avian. It's one that is inclusive and increasingly diverse. It's innovative and bold, as our people bring ideas to life for a greater good and a more circular economy. It's also a culture that loves to take care of our customers and each other, which is exactly what we have done this year. I'll have some closing comments in a moment, but now Jamie will go into more detail related to our fourth quarter results and provide our initial outlook for 2022.
spk06: Thank you, Bob. Winning and creating shareholder value is exactly what we did in 2021. Slide 14 shows our fourth quarter performance, highlighting the growth in our key focus areas, as well as the impact of higher wages and supply chain costs. On the following slide, you can see the impact of our pricing actions to more than cover these costs. I call your attention to the demand sidebar, where we have broken out the impact of normalizing demand for outdoor high-performance applications and the decline in transportation sales. Recall that in the fourth quarter of 2020, we saw a surge in demand for outdoor applications as people sought more activities outside their homes during COVID. Transportation is down, we believe, primarily due to chip shortages. Both have a relatively small impact on overall performance. But the preponderance of this is within our SEM segment, which is why SEM operating income declined in the fourth quarter. Excluding the impact of these two markets, operating income was up 10% year-over-year as we saw solid growth in other areas of the business, including demand for 5G applications. As we look ahead to our projections for 2022, we do so with the recent trends in mind, but also with confidence that our four key growth drivers highlighted at our investor day will drive significant sales and EPS growth. Those four areas are sustainable solutions, healthcare, composites, and regional expansion in Asia and Latin America. With the exception of an expected decline in demand for outdoor applications, our projections for 2022 are in line or above the long-term growth rates we communicated in December and are laid out in this slide shown. Sales are expected to grow to $5.1 billion, which represents a growth rate of 6%, or 7.5% excluding the impact of negative foreign exchange. For the first quarter and full year, we expect this revenue growth will drive a 7% and 15% expansion in adjusted EPS, respectively, to 95 cents in Q1 and $3.50 for the full year. We expect a lower adjusted EPS growth in Q1 due to negative foreign exchange rates which is more heavily weighted to the first half of the year, as well as anticipated supply challenges as we start the year. We provide further details of sales and operating income projections on the following slide. We put the first quarter and full year side by side so you can see the trends. You'll notice wage inflation is heavily weighted towards Q1 as we lap the increases we implemented last year. The same is true for certain supply chain disruption costs and, as previously noted, negative foreign exchange. As many companies have reported, the Omicron variant has created additional complexities with supply chain dynamics as we exited 2021 and started 2022. At the end of January, we had the highest level of unshipped orders we have had in the previous 12 months. This is due to ongoing supply chain challenges, but also because of the COVID Omicron variant. In January, we had approximately 20 plants experience significant absenteeism. This impacted the entire value chain, exasperating raw material shortages, and variability in order patterns. For the full year, we expect strong growth from each of our key growth platforms and additional synergies from the clearing integration. This will substantially exceed expected increased costs associated with supply chain challenges, inflation, and negative foreign exchange. I know this is a lot to digest, and we'll have time for questions at the conclusion of our prepared remarks. My final slide summarizes our full-year cash flow generation and expected year-end leverage. Free cash flow is expected to be $250 million in 2022. This is an increase of $117 million over the prior year, which included a significant increase in working capital associated with inflation and supply chain issues. We are planning to spend $135 million of CapEx, $45 million of which is associated with the clearing integration and an IT upgrade we expect to kick off this year to put Legacy Poly One and Legacy Clarent on one system, which will further improve operational efficiency and the overall integration as one aviant. Now I'll turn the call back over to Bob for some closing remarks.
spk07: Thanks, Jamie. 2021 was indeed a year of record results and milestone achievements. Those include delivering the highest level of sales and earnings in our company's history, the success of the Clarent integration, and we were recognized as one of America's most responsible companies by Newsweek, and we earned our third consecutive Great Place to Work certification. We are proud of all of these accomplishments, but we have even higher expectations for the coming year. And as we start our second full year as Avian, we expect to deliver 15% adjusted EPS growth to $3.50 as EBITDA increases to $635 million on $5.1 billion in revenue. As Jamie said, we anticipate free cash flow to be up this year to $250 million. And that's cash that we can actively seek to put to work, adding new or complementary technologies through select acquisitions that expand our sustainable solutions and composites platforms. We have quickly delevered from when we first announced the Clarion Color acquisition and confidently have the balance sheet strength to pursue both smaller bolt-ons as well as more transformational targets. As you know, we are not a volume-driven company, but rather a value-driven company. Accordingly, we haven't pursued revenue just for the sake of being bigger. But we are bigger and more profitable than we have ever been. And I think reaching $5 billion in revenue will be a milestone achievement for us this year that hopefully also puts us on more investors' radar screens. We thank you for your time and attention this morning. The upcoming year will have its challenges for sure, but we have the strategy, the team, and the culture to build on our momentum so that we deliver another exceptional year for our customers, our shareholders, and our associates. With that, we'd now be happy to take any questions you may have.
spk04: Thank you. And to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the hash or pound key. Please stand by while we compile the Q&A roster. Your first question is from Mike Sisson with Wells Fargo. Your line is open.
spk02: Hey, good morning. Congratulations on another nice quarter. I guess I wanted to dig in a little bit on the revenue growth for 22. It looks pretty impressive for all the major areas, Stan Sluza Healthcare and such. Are those orders, can you maybe just give us a little bit of color and are order patterns in? How much of that growth rate, I guess, is locked in to some degree?
spk07: I mean, well, look, as you know, we don't have an extensive backlog in this business, Mike. We really do have order visibility out about 30 to 45 days at any point in time. So we do have, look, modest demand expectations or rather demand growth for the year at probably 2% to 2.5% with the balance of that being really pricing actions, a lot of which is carryover from So we certainly know what those pricing actions are. I think demand is the one thing that really kind of remains to be seen past what we have in our order books right now.
spk02: Got it. And then I guess inflation will be a little bit more of a headwind in the first half. It looks like EPS growth first quarter is solid, but a little bit less. Is that what's impacting demand? sort of the EPS growth in the second half, you catch up and get a little bit more momentum there?
spk07: Yeah, I mean, I think the bridge schedule, we've got the webcast slides, you know, kind of help to illustrate some of the front load impact of wage inflation, the supply chain disruption costs, and then also negative foreign exchange. So currencies for us started to turn negative at the end of last year. We expect that impacts us the most. heavily in the first and second quarter of this year.
spk02: Got it. Thank you.
spk04: Thank you. Our next question comes from Frank Mitch with Fermion Research. Your line is open.
spk12: Hi, everyone. It's Aziza. I'm for Frank. So my first question would be, you know, with net leverage at the 2.2 level, might we see buybacks more than just the offset dilution?
spk07: I think that really, obviously, we are and historically have been an opportunistic buyer of our shares back, I think, in the third quarter or so of last year. We did say that with leverage getting down to where we expected it to be, we could be buying shares again. So that could happen in the early part of this year. I think As you know, our preference is to try to put cash to work to invest in the business with M&A, but if the deals don't come to fruition, then we certainly could be buying shares.
spk12: Got it. And elaborating on the pricing and ROS outlook through 2022, could you maybe provide more details on what you still see on the high side of ROS?
spk07: By high side, do you mean like product families or percentage increases or what? Please help me out.
spk12: More of the percent, like what still is elevated as far as percentage increases.
spk07: Yeah, maybe I'll start this way. I'd say to start the year there really are only two areas where we're seeing things start to moderate. So polypropylene, polyethylene, which as you know are actually relatively small percentages of our spend. The polyolefins in general are relatively small. Everything else is still trending up when we look at everything else that we have, either from pigments, dyes, and some of the performance materials that we have in engineering materials. And right now, that trending is probably mid to high single-digit inflation.
spk12: Got it. Thank you so much.
spk04: Our next question comes from Mike Harrison with Seaport Research. Your line is open.
spk10: Good morning. Congratulations on the strong finish to the year. I was wondering if you can talk a little bit more about what you're seeing in outdoor high performance. It seems like we're seeing that demand normalizing a little bit. Just maybe some more color on what you saw in Q4 and what you're hearing from your customers about 2022. I guess we kind of had a sense that there would still be some inventory replenishment that needed to happen, even if we saw demand come off these elevated levels. So what's going on there?
spk07: Yeah, it really is actually pretty narrowly restricted to firearms and just some of the hunting-related applications that we had that we actually saw down in the fourth quarter and expect to be down in 22. I think things like off-road vehicles will actually still be very strong in 22. So it really is kind of narrowly focused with what we see slowing down right now. Mike, there's plenty of other applications that I think will be strong. You know, as we probably talked about throughout the course of the year in conversation with our customers, you know, they're struggling to meet demand, particularly in the off-road vehicle sector. So We're still hearing the same thing, so in many of those cases, I think consumer will still be a good year in 2022.
spk10: All right, and then I was hoping you could give an update on the expected revenue synergies from the Clarion business. Obviously, you guys raised your cost synergy outlook, but are there some concerns Commensurate increases in your expectations for revenue synergies maybe give us a sense of whether you're seeing some traction or can highlight some areas where you've seen cross-selling opportunities that have materialized already.
spk07: We are certainly seeing some early opportunities. And as you know, for us, commercial wins have a tendency to be fairly small in size when you look at them on an individual basis. So, order of magnitude, the impact in 21 was still relatively small. I think we will start to see more traction in 22, and hopefully that aligns with maybe a little bit more normal market conditions. But we haven't changed the overall level of expectations, which is around $50 to $75 million of revenue from those synergies, and have long said that that's something we see out in years three, four, and five.
spk10: All right, and if I could just sneak one more in. I'm curious on the IT system upgrade. What is the total capex associated with that project, and can you give us a sense of the timing of implementation and go-live? Thanks.
spk06: Sure, Mike. So we plan on kicking that project off in the middle of this year. At this juncture, it's going to be a multi-year project, as you can imagine, combining the magnitude of the sites that we have with both Legacy Poly1 and Legacy Clearance. Current estimates are between $50 and $70 million. We're still working through all those cost estimates. So we'll kick that off in earnest in the middle of the year. And as we refine those estimates, we'll provide that out. We did put about $25 million or so in the budget for in the outlook that we provided today, and those things will continue to get refined as we get more into the project details.
spk10: Perfect. Thanks very much.
spk04: Thank you. Our next question comes from Ben Callow with Baird. Your line is open.
spk01: Hey, thanks for taking my question, guys. Good morning. I wanted to just talk about on the balance sheet and just what you're seeing out there in terms of acquisitions. I know you've talked about sustainable solutions as an area of focus, but maybe just what you're seeing as far as pipeline and then around valuations as well as we look forward. Thank you.
spk07: Yeah, maybe I'll take the last part first. I mean, valuations have certainly gone up significantly in the last year. you all are aware of the headline multiples you're seeing being announced. They're pretty high. The expectations are the same as we're looking at deals right now. We're not going to chase doing deals just for the sake of doing one. We want to be prudent with our capital and make sure they make financial sense. We have been looking at a number of deals. We've had a couple that were actionable that we just decided not to move forward with, candidly because of valuation. So they were simply too high. So I'm expecting that's going to be a challenge with respect to doing deals this year, but hopefully we can get the two to come together in the right way. We do really want to focus on those two areas of sustainable solutions and composites as our next deal.
spk01: And then my second question is just on pricing, because you guys navigated inflation very nicely during the year. It sounds like you have some expectations into this year of doing that, too. How much, I guess, room is there with customers to go out and continue to raise price? A lot of that has been set already. Is that what you meant earlier in your comments? And thank you.
spk07: Yeah, what I meant earlier, and that might have been a Mike's earlier question, is that for the most part, I was just referring to the rollover impact of price increases that were announced in 21. There could be some more modest increases this year. As I was saying, a number of our raw material costs continue to increase. There are a couple that seem to be down or moderating. but candidly, as long as those continue to go up, we have to do the same thing with our prices. I just haven't quantified or modeled out what that looks like so far.
spk01: Thank you.
spk04: Thank you. Our next question comes from Bob Court with Goldman Sachs. Your line is open.
spk08: Thank you. Good morning. Bob, I wanted to ask, you uttered the words you could pursue transformational deals, and I guess For many investors, that can be somewhat chilling. But I guess your one transformational deal, and the stock's doubled since you did it, so maybe you get the benefit of the doubt, but what would be transformational? What more do you guys need relative to the pretty inspired growth you have in front of you? And then your comment about opportunistic share purchase, does the stock trailing off 20% in the face of good numbers present that opportunity?
spk07: So to the latter question, yeah, I think it does with respect to the first part. I think transformational is something probably on the composite side. There are some things that I think would also probably be deemed such in sustainable solutions that could still be additive to the color segment. I really am just intending to say that, look, with our balance sheet strength, I think we could do a broad array of deal sizes. And so, that's primarily the reason for that comment that I made earlier. But obviously, with what we've done with putting together, you know, Legacy Poly One and Legacy Clarion, I think we would be looking to expand color primarily into additives and things that might expand the sustainable solutions. not some of the traditional deals we've looked at in the past.
spk08: Gotcha. And if I could follow up, you know, you guys have had pretty exceptional expense control. Obviously, your price-cost management has been great. I'm wondering, you know, as a specialty formulator, I assume that requires a lot of consultative selling, and you've had to adjust the way you execute your business in terms of COVID and all the – you know, the limitations that creates. Do you think there's permanency to some of these changes? Has it created some challenges or opportunities? How has the business model and the way you execute that strategy changed permanently that has, or should we expect a cost burden coming back in?
spk07: Yeah, so, I mean, if you were to look back over, let's say, a three- to four-year time horizon, as you know, you would see an increase in resources dedicated to sales marketing and technology and We have had some offsetting cost reductions in general and administrative to kind of help keep that flat. And obviously, when we brought Legacy Clarion and Legacy Poly 1 together, you know, our intention wasn't to, you know, reduce our headcount in those areas. But we have had some attrition simply as a result of, I think, COVID and the challenges of the last couple of years and are finding that we don't need to replace all of those positions in kind. So... As we look ahead to 22, I don't see any reason why you see cost increases, you know, filtering in in any way that's unusual or unexpected. I think we'll still be in really good shape with respect to how SG&A marries up to our overall, you know, level sales growth.
spk08: Got it. Thanks for the help.
spk04: Thank you. Our next question comes from Kirsten Owen with Oppenheimer. Your line is open.
spk11: Hi, good morning. I wanted to follow up on some of the comments about the digital investments that you made at the analyst day. And I'm just trying to think about how we should be tracking the benefits of those. So I'm wondering if you can talk maybe about cycle times with your customers and how those are trending for some of these newer sustainable solutions, or, you know, if it's not cycle times, but something else, just provide us some guardrails on how we can measure the progress of those digital investments that you're making. Thank you.
spk07: Did you say about the investments in digital? Yeah, so what we're actually seeing the most traction with really is just how we can engage with our customers, either by web-based interactivity or simply being able to do more transactional work online. You know, for a lot of our customers, that's just a heavy amount of work for them to simply you know, just want to engage with us on where are materials and when are they going to be here. And as you can imagine, over the last 18 months, that's been the number one, two, and three questions. So I do think that digital investments have helped us in that regard. I think more than anything else, it's just been from an operational standpoint. I do see future opportunities, though, to really help, I think, improve how we engage quickly with our customers, you know, on innovations. and really think that we've got good system alignment with respect to how we marry up a lead into our innovation team and then ultimately circle back. Candidly, with respect to measuring that performance, I think it can show up in any one of the key growth areas that we have, and it's an important part of our investments to drive growth in all those, not something I would specifically look to in the future and say, oh, this was digital growth, for example.
spk11: That's helpful. Just to follow up on some of the commentary around composites then, you know, in outdoor performance, despite what you're talking about as sort of a normalization next year, you know, that end market has been a really strong proof point for the composites business. I'm wondering if you can give us a sense of how you think about composites traction outside of that application developing in 2022. Yeah, I mean, so
spk07: One of the things that we highlighted at the investor day, of course, was our, you know, investment in, you know, fiber line that we did in 2019 and composite applications associated with 5G build-out related infrastructure. Currently, I think that's going to be one of the fastest growing areas of composites for us, and that's why we highlighted it then. You know, what we're seeing right now with respect to normalization of demand in the outdoor space is pretty narrowly focused. It's very profitable business for us, and so when you look at the bridge schedules and the webcast slides, you can see that, and that's what we've modeled in the 22. But more broadly speaking, I still think there's a tremendous amount of growth opportunities outside of that for composites this year.
spk11: Thanks so much. Congratulations on the nice quarter.
spk07: Thank you.
spk04: Our next question comes from Lawrence Alexander with Jefferies. Your line is open.
spk05: Good morning. Can you talk a little bit or unpack the comments around unfilled orders? What sort of dynamics are you seeing? Are you typically seeing churn or are you getting all of that business back as your capacity can catch up? And do you ever see customers in the process of upgrading to different products? So you basically churn out, but you're basically cross-selling your own solutions rather than losing to other customers.
spk07: So, look, first of all, the comments that Jamie made with respect to unshipped orders in January was really heavily impacted by the Omicron variant, and the fact that we had 20 facilities. So that's one-fifth of our manufacturing sites had significant absenteeism of around 20% or more of our associates who were out. As we look at our COVID case rate over the last, gosh, almost two years now, right, I mean, it's really heavily weighted towards the last month or so. So Omicron's real. It certainly has impacted a lot of people, and I think that's weighed on us most heavily. Supply chain disruptions certainly have been a factor in that as well. We don't believe that we're losing any business as a result of that, and largely what you see is an ability to get those orders out in the next month. But that just makes it more difficult to get the next month's orders out, if you follow me. Candidly, these supply chain disruptions are here. We don't see an immediate end to those, and I think that's going to be a dynamic here for the near term.
spk05: Okay, thank you.
spk04: Thank you. And as a reminder, to get in the queue, simply press star 1 on your telephone. We have a question from the line of Angel Castillo with Morgan Stanley. Your line is open.
spk03: Hi, good morning. Thanks for taking my question. I just wanted to follow up on that last discussion around the unshipped orders. You noted that a lot of this probably has to do with Omicron and just the absenteeism that you were seeing in January. How is that trending now in February with cases seemingly starting to go down in most regions? Just as we think about the potential improvements, at least those 20 plans that you noted, are you starting to see that pick up a little bit, or how should we think about, I guess, what you're seeing there?
spk07: Yeah, I mean, so maybe to put it in the context of the number of impacted facilities, that is certainly coming down in February. Our case experience really follows that of what you see by jurisdiction around the world. There's nothing unique about us in that regard. I think case rates are coming down. I think that helps us from a manufacturing standpoint and should allow us to do better in February than we did in January.
spk03: That's helpful. Thank you. And then on pricing, the discussion you had earlier about continuing to potentially drive a little bit more pricing to move along with kind of the non-resident products that continue to see inflation. In terms of the areas where you are seeing a little bit of deflation or kind of normalization, Do you see any pressure to reduce prices in any areas, or are you able to maintain that? Can you just give us a little bit more color around that?
spk07: I mean, look, with respect to the base residents that we distribute on behalf of our suppliers and our distribution business, that's largely just pass-through pricing. So I think you will see that immediately in the first quarter. That's normal. that as an input cost for other businesses. It's a relatively small percentage of our total spend. As I said, the other areas are all still kind of clipping along at mid to high single digit inflation. And as a result of that, that's why I made the comment earlier that I did that that could warrant additional price increases as we go through the year.
spk03: If I could sneak one last quick one in. just in terms of the various regions, if you could just give us more color as to what you're seeing across the different, you know, Europe versus North America, et cetera.
spk07: Yeah. I mean, there were, you know, as we looked at the fourth quarter, I mean, first of all, I think we are really starting to see some more normal seasonality in the business. Obviously in 2020, that was, kind of muddled with respect to acquiring Clarion and then having this tremendous growth coming out of the pandemic and weren't exactly sure how that would play out in 2021 other than we expected Q4 to be down and it was. So I think there's some seasonality elements there with Europe typically having a stronger first half versus second half of the year. Look, from a demand standpoint, there was really only two things to kind of highlight that we saw and we talked about earlier, which was transportation. And that was down for us around the world, but most significantly in Europe. So I guess there's a regional observation to be made there. And then with respect to outdoor, that's primarily in North America. So overall, I mean, demand was relatively flat here in the fourth quarter. with some things like healthcare being up significantly, and then the other markets that I just talked about being down or flat.
spk03: Great. Thank you.
spk07: Certainly. I think that was our last question. So, we appreciate everyone's time and attention this morning. We look forward to updating you on our first quarter performance when we get to the time to do that in April. So, for now, goodbye and take care. Thanks, everybody.
spk04: Thank you, ladies and gentlemen. This concludes today's program. Thank you for participating, and you may now disconnect.
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