This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Thank you for standing by. Welcome to the SPX Corporation's first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require further assistance, please press star 0. I would like to hand the conference over to your speaker today, Paul Clegg, Vice President, Investor Relations and Communications.
spk00: Please go ahead. Thank you, and good afternoon, everyone.
spk01: Thanks for joining us. With me on the call today are Gene Lowe, our President and Chief Executive Officer, and Jamie Harris, our Chief Financial Officer. A press release containing our first quarter results was issued today after market close. You can find the release in our earnings slide presentation, as well as a link to a live webcast of this call in the investor relations section of our website at spx.com. I encourage you to review our disclosure and discussion of the app results, in the press release and to follow along with our slide presentation during our prepared remarks. A replay of the webcast will be available on our website until May 11th. As a reminder, portions of our presentation and comments are forward-looking and subject to safe harbor provisions. Please also note the risk factors in our most recent SEC filings, including our disclosures related to the ongoing COVID-19 pandemic. Our comments today will largely focus on adjusted financial results and comparisons will be to the results of continued operations only. You can find detailed reconciliations of historical adjusted figures to their respective gap measures in the appendix to today's presentation. Our adjusted earnings per share also exclude non-service pension items, amortization expense, and investment gain, certain favorable discrete tax items, and other strategic related items. Finally, we will be conducting virtual meetings with investors over the coming months including at the Luke Capital Investor Conference in New York on June 2nd. And with that, I'll turn the call over to Gene.
spk05: Thanks, Paul. Good afternoon, everyone, and thank you for joining us. On the call today, we'll provide you with a brief update on our consolidated and segment results for the first quarter. We'll also provide an update to our four-year guidance, which includes the impact of our most recent acquisition. Now, I'll touch on some of the highlights from the quarter. We had a stronger than anticipated start to the year, exceeding the overall expectations that we laid out during our last call in February. As expected, we continue to see challenges related to production and labor, but we've also seen improvements throughout the quarter and expect further improvements during the remainder of the year, particularly in the second half. During the quarter, we continue to execute on our value creation framework, with another strategic acquisition that further builds and strengthens our aids to navigation or ATON business and our detection and measurement segment. We believe that International Tower Lighting, or ITL, is an excellent strategic addition to our existing ATON platform. Today, we are updating our four-year guidance for the acquisition of ITL, which we completed on March 31st. We are on track to achieve solid earnings growth for the full year, approximately 16% at the midpoint of our updated range. As a reminder, when we initiated our 2022 guidance, we indicated that Q1 would be low versus the prior year due to the timing of certain project revenue and detection measurement and the impact of a customer rate case on our ULC business. For the quarter, our operational outperformance versus expectations was due to upside in our location and inspection and transportation platforms, including the impact of some earlier than anticipated transportation deliveries. Overall, we continue to see strong demand across our markets and managing production constraints remains a key driver of our full year performance. In summary, I am pleased with our results for the quarter and our positioning for the future. With significant capital availability, an attractive M&A pipeline, and several ongoing organic growth and continuous improvement initiatives, SPX is poised to continue driving value for years to come. As always, I'd like to touch on our value creation framework. We continue to make progress in a number of areas during Q1. Our digital initiative, progressed further during the quarter, particularly in our location and inspection platform, where the value proposition of our data offerings is gaining significant traction with utilities and other customers. Our continuous improvement or CI initiatives remain critical to our management of the current supply chain and labor constraints, as well as our integration processes for new acquisitions. Several of our CI initiatives over the last two years have been focused on throughput and sourcing, which have helped us to navigate the current environment. During Q1, we saw the benefit of these initiatives and the ability of our businesses to meet customer demand in the face of continued challenges. Our ESG initiative also continues to gain traction and shares many benefits with our CI initiatives. As an example, our primary U.S. cooling plant drove savings in net input costs when it invested in a recycling process to eliminate 950 tons per year of wood waste from pallets and crates. They also worked the third party to transform 625 tons per year of PVC scrap into eco-friendly decking material. We also continue to advance our growth initiatives in Q1, further building out our ATON platform with the acquisition of ITL. ITL adds approximately $18 million of annualized revenue to our detection and measurement segment at accretive margins. It strengthens our terrestrial lighting business, Flash Technologies, with a broader set of high-quality obstruction lighting, as well as parts and services, including value-added monitoring and communication. We are very pleased to welcome the ITL team to the SPX family. Since our first acquisition within our ATON platform in early 2019, we have transformed a roughly $50 million North American obstruction lighting business into $150 million global end-to-end aids to navigation market leader. With our enhanced scale, global presence, and broad technology and product expertise, we offer our customers greater value-added solutions that are helping us win in our end markets. Before moving on to Jamie's discussion of our results, I'd like to take a moment to review our capital deployment strategy. Since early 2021, when we committed to the process of selling the Transformers Solutions business, we have made four highly strategic acquisitions within our HVAC and detection and measurement segments, CLITE, ECS, Cincinnati Fan, and ITL. These additions expand our market presence and our growth and margin profiles while creating significant opportunities to benefit our customers, employees, and shareholders. While Transformer Solutions was a profitable business for us, it experienced cyclicality in its results. As we discussed at the time of the disposition, our strategic goal was to redeploy capital into higher growth, higher margin businesses, that are more aligned with our strategic platforms. As we monitor the strategic redeployment of this capital on a pro forma basis, we believe we have replaced approximately 60% of Transformer's average segment income. We are especially pleased that we've been able to acquire businesses with significantly higher margins and growth opportunities at reasonable multiples. We are very excited about our progress today and our opportunities to continue executing on this strategic transformation of SPX as we work towards the 2025 targets that we shared in June of 2021. Our business development team remains busy and we continue to have a strong front log of acquisition prospects and substantial capital available to deploy. And now I'll turn the call over to Jamie to review our financial performance in detail. Thank you, Gene.
spk06: As Gene noted, our adjusted APS of 40 cents exceeded our internal model and previously communicated expectations. As discussed last quarter, our Q1 results were constrained by the timing of project orders and contact and the impact of a rate case in our ULC business. In addition to the segment income drivers, which I will review later, Some below-the-line items had a modest impact on our year-on-year earnings, including lower corporate and interest costs and a higher tax rate. Overall, we are pleased with our performance for the quarter and believe we are well positioned for the full year of 2022. A review of our adjusted segment results reflects stronger than anticipated performance, but as expected, with an overall decline in segment income and margin when compared to the prior year. Revenues increased 6.9%, Revenues from the acquisitions of Sea Light, ECS, and Cincinnati Fan accounted for 9.9%, while our organic revenues decreased 2.5%. As anticipated, organic revenue decreased due to lower detection and measurement revenue, although it was better than expected. This was partially offset by price increases. Price cost was a modest margin headwind for the quarter. For the full year, we currently anticipate price cost to be a modest tailwind. The lower organic revenue combined with production constraints in HVAC drove a decline of 7.4 million in segment income and a 350 basis points decline in margin. Segment revenue, income, and margins reflect the blended impact of acquisitions and lower overall organic revenue. Let's now review the details of our segment responses. In our HVAC segment for the quarter, Revenues increased 10% driven largely by our acquisition of Cincinnati Fan and a modest organic increase. While overall demand was strong across our end markets, the impact on our results was moderated by supply chain challenges, primarily in heating and labor in both heating and cooling. Organically cooling revenue declined modestly with stronger pricing offset by moderate declines in volume. Heating revenue grew solidly with strong revenue and strong growth in boiler revenue largely due to pricing partially offset by lower electrical heating volume and revenue. Adjusted segment income and margin decreased by 2.4 million and 240 basis points. As mentioned, while managing these constraints remains a critical factor in our full year performance, we have seen and continue to see some improvement in both areas. In detection and measurement, revenues were up 2.2% year over year. The acquisitions of Sea Light and ECS drove a 10.3% increase, while organic revenues declined 7%. We also experienced a higher than typical currency impact due to the strengthening U.S. dollar, a 1% translation headwind. As we indicated would be the case, the decline in organic revenues was due to the timing of ComTech project shipments and lower ULC revenues. Even so, the performance for Q1 exceeded our expectations due to strong locator sales and early delivery of transportation projects initially anticipated for mid-year. Adjusted segment income decreased $5 million, while margin decreased 480 basis points due to lower revenue, particularly the timing of contact projects which carry high incremental margin. For the remaining quarters of the year, we continue to expect higher year-on-year segment income. Overall, we continue to see significant demand in both our run rate and project business. We see the primary driver of full-year results for the detection and measurement segment being the timing of project orders and shipments. Turning now to our financial position at the end of the quarter. Our balance sheet remains strong, and we continue to have more cash than debt. Notable cash uses this quarter included the $42 million acquisition of ITL, strategic investments in inventory associated with managing supply chain constraints, and various other items associated with discontinued operations and reducing our exposure to legacy liabilities. For the full year, we continue to anticipate a solid free cash flow performance with the bulk of cash generated in the second half of the year. Overall, our balance sheet and available liquidity place us in a strong position to continue our organic and inorganic growth initiatives. As a reminder, we have a $100 million share repurchase authorization. We have in place a program under which we may engage, when appropriate, in opportunistic share repurchases included on the open market as part of our capital allocation policy. Moving on to guidance. We have updated our full year 2022 guidance to reflect the ITL acquisition, which we anticipate will add approximately five cents per share to EPS based on nine months ownership. While our prior guidance included a modest amount of direct Russia-Ukraine revenue exposure, we have removed this from our current guidance, offset by better operational execution trends. We now estimate adjusted earnings per share in the range of 255 to 285. This represents an increase of about 16% at the midpoint, 270, compared with 2021 adjusted EPS of 233. As a reminder, we have approximately $270 million of cash on the balance sheet. If we use our cash to repay debt, our midpoint EPS would be approximately 11 cents per share higher. As always, you can find modeling considerations in the appendix to our presentation. We have made some modest adjustments to interest costs, tax rate, and other factors. Together, these have no material effect on our net results. I will now turn the call back to Gene for a review of our end markets and his closing comment.
spk05: Thanks, Jamie. We continue to monitor and manage through macro risks, including supply chain, input cost inflation, labor, and the exacerbating effects of geopolitical tensions and regional pandemic restrictions. We also remain encouraged by the strong level of demand and the positive trends we are seeing in our end markets. These include growing opportunities related to spending on infrastructure, and digital offerings and the efficiency benefit they provide in a skilled labor shortage market. In HVAC, several macro indicators point to continued strength in non-resi activity, particularly in the U.S. as they pertain to our cooling and commercially focused heating businesses. In our boiler business, which encompasses both residential and non-resi products, we continue to see strong order demand across the board. In detection and measurement, locator demand continues to reach new levels of strength and to benefit from our internal growth initiatives. Overall, ATON demand remains steady. We're also seeing growing interest in our innovative comment or communications intelligence solutions. We're assessing the timing of potential customer needs. In summary, I am pleased with our better than expected Q1 performance. and proud of the way our team has continued to execute on our initiatives for future growth. I'm excited about our recent acquisition of ITL, which further extends our ATON platform and creates additional growth opportunities and value for our customers. I'm also encouraged by our setup for the remainder of the year while remaining vigilant in addressing the current macro risks. With a strong balance sheet and a highly capable, experienced team, I'm looking forward to the opportunities that lie ahead as we continue to create and deliver value for shareholders. And now I'll turn the call back over to Paul.
spk01: Thanks, Gene. Operator, we are ready to go to Q&A.
spk03: As a reminder, to ask a question, you need to press star 1 on your telephone and to draw your question, just press the panel key. Please stand by while we compile the Q&A roster. Our first question will come from the line of Damian Cross from UBS. Your line is open.
spk02: Hi. Good evening, guys. Hey, Damian. Hey, Damian. Gene, you mentioned you're still seeing challenges out there in the supply chain, but you're seeing some signs of improvement. Could you maybe just talk a little bit more about that? Where are you seeing the improvement versus where is it still a struggle out there?
spk05: Yeah, I think at a high level, what I would say is internally what we've done and how we've managed, I'd say that we feel very good about the actions that we've taken and the countermeasures we've put in place from a whole host of different levers we've been pulling from, you know, investing in some safety stock, engineering, alternative component solutions, looking at our reorder rates in terms of how we manage our orders with data and analytics across all of our businesses. There's a lot of levers that we've pulled, and I'd say that combined with what we're seeing is just a little bit of modest improvement in the market overall. I'd say the one item that would be a headwind that we are seeing right now would be some of the China lockdowns. in Shanghai. Jamie, you spent an enormous amount of time on this. You want to give some color here?
spk06: Yeah, thanks, Gene. We are seeing some modest improvements. If you look back, we really felt supply chain more prevalent in our cooling, which I'll include some labor there, as well as some stainless, and in our heating with just general components. On the DNN side, we have managed it very well. It really hasn't caused any disruptions. We continue to do that. Eugene mentioned some of the kind of operational steps that we've taken. You'll notice on our balance sheet an investment in some safety stock. Year over year, we're about $22, $23 million more investment than inventory. That was intentional to try to get ahead of some of the areas that we saw some potential shortages coming in. We have We do not have a lot of disruption from an availability standpoint from the Russia-Ukraine situation. Gene mentioned China. We are experiencing some slowness in ocean freight. And so that's something we have to be very diligent on in our order times and our lead times have to go out further than what would typically be the case. But overall, I think we're seeing, you know, again, some modest improvement. If you look at it from a year ago, clearly challenged. If you look at it from last Q3 when we first raised this issue in the call, we have seen some improvement there.
spk05: And I'd also say somewhat correlated, Damian, on the labor side, we are seeing some improvement across our facilities, and a lot of our countermeasures have been making some impact. So, yeah, we're also seeing some modest improvement there as well.
spk06: Damian, another thing I might add, if you look at cost, If you go back and look in the items that are prevalent in our supply chain, the year-over-year costs are still up quite significantly. But if you look over the last 90 days, we're seeing some pricing of the underlying commodities go down with the exception of those items that have been impacted by Russia and Ukraine. Nickel doubled quickly after the first invasion It's back down. It's up about 20% since that time. Of course, crude oil is up. So those things are directly related. We're seeing some continued price increase. But in many other areas, we're actually seeing some prices come down over the last 90 days, which is encouraging.
spk02: That's helpful. And that's actually a good segue to my next question. I think you mentioned earlier that that you're actually expecting price costs to be a tailwind for the year, which is, you know, interesting considering there's, I think, general inflationary pressure still out there. So, you know, have you been aggressive on pricing or is it what I think you just kind of alluded to that you're maybe actually expecting to have lower costs, material costs, you know, through the rest of the year? And is that kind of, reflected in your updated margin guidance?
spk06: Yeah, I would say we have been aggressive on price. We, you know, last year, you know, I think for everybody, it was hard to keep up with some of the price, some of the cost pressures, but we've got into a really good cadence. We have been, you know, again, aggressive to cover costs with our customers. You know, given the fact that we're a highly engineered product, we're often specially ordered products. That gives us some better pricing power in the marketplace, if you will. That said, costs, again, we have seen some decline over the last 90 days in the base commodity. We still have some backlog to work through. The good news is our backlog is up substantially year over year, but there is some backlog to work through with some pricing pressure on it. to the point about seeing costs go down. We're looking at that as part of our guidance. We've taken what we see, the risk factors of price escalation and availability, as well as potential pickup because of maybe some cost reductions, all that's baked into our guidance. So I'd say we're optimistic about it, but there's still a lot of work to do.
spk02: Great. Thanks for all the details. I'll get back in the queue.
spk03: Our next question will come from the line of Brian Blair. Brian, your line is open. Brian Blair from Oppenheimer. All right. Our next question will come from Steve Fazzani from Sedoti. You may begin.
spk04: Thanks. Evening, Gene, Jamie. I wanted to ask, and it sounds like demand remains very healthy, but I'm trying to think about risks of a rising rate environment and impact down the road on demand. I know you have significant aftermarket exposure, significant infrastructure exposure, which helps you into 2023. But how are you thinking about the demand equation and maybe particularly on non-resi construction in the environment we appear to be entering?
spk05: Yeah, sure, Steve, I'll take that. I think, as you know, if you think about our HVAC business, I would say it's in a very healthy position. So this is approximately a $900 million business. More than $700 million of that is non-resi. and all of the sub markets that would be a part of that hospitals, data centers, commercial. Um, if you look at the Dodge index, uh, the current, the latest projections are about 9% growth in 22 and around 11% growth in 23. Uh, additionally, some of the, um, the, the more leading indicators, the more canary in the coal mines there also look positive. That would be the, uh, the Dodge Momentum Index, the ABI, you know, the architectural billings. So overall, I would say we feel good. You know, obviously we have to keep our eyes on the macro, but if I look across our HVAC businesses, we feel very solid. The other question that we always look at on our hydronic side, our boiler side, is the stocking of the channels. Is the channel overstocked, understocked? And we actually feel like we're in a good position there. The channel's very much wanting more of our product to be ready for this year. That's something we'll have to keep our eyes on in 2023 to make sure the pull-through demand is there. But as you know, that's a good chunk of that. A big portion of that business is largely replacement. So when I sit and look at the HVAC segment. I actually feel really good about what we're seeing over the next year and a half with how things are forming in front of us. On the DNM side, I would say it's overall very healthy. The run rate is very solid. Our projects are strong and our backlog supports 22. And I would say what I see today is sets us up very well for 23 and beyond some of the project businesses i'll call out transportation and context specifically have a higher amount of activity and we have some larger wins and some also some impacts from the infrastructure bill that we see starting to manifest so i think you know when i look at dnm i actually feel very positive about where that's going now I'll caution all of this with if everything were to slip into a recession, that's something we have to keep our eyes on. As you know from when COVID hit, also when we looked at this in 2008, our businesses tend to be more resistant to recessions because a lot of our products are safety products or mandated by government regulations. the products are less discretionary. That's not the case across all of our businesses, but there's a substantial amount. So, you know, as a reminder, when we went through the first year of COVID, actually our earnings were flat, you know, despite a lot of markets facing some real headwinds. So where we sit today, we feel good. And we are keeping our eyes on if if there is any economic impacts in smartly managing that if that were to happen.
spk04: Fantastic. And if I could then use that as the framing device for the question in terms of pipeline, what's out there and do you see any impact on maybe lower prices for certain acquisitions given the environment or certainly the idea that there's more risks out there?
spk05: Yeah, that's a good question. I think overall we feel really good about our growth strategy. We closed ITL. That's our 11th deal. That was a great strategic fit. They've got really good technology, really good network operation center, monitoring capabilities. And, you know, as you know, our average over our 11 deals has been 10.5 times pre, 8.5 times post. I think... We feel really good about that pricing. We've been very disciplined there. I don't see changes, at least from what we've seen in front of us below that. We actually see, particularly in our detection and measurement businesses, and you get into some larger sizes, some much, much higher multiples. We're fairly careful and focused about where we build out our platforms, but But if I look at it, if you look at our HVAC and detection measurement businesses, these are in the neighborhood of $700 million at the time of spin. That's six and a half years ago. We're sitting today at about a billion four. And right now we're sitting here with, as you know, an incredibly strong balance sheet. So we really have an attractive opportunity in front of us. And I'd say The areas that we see a good amount of activity would be in the location and inspection platform. We see some opportunities there to continue building. I'd say our cooling or engineered air quality. I'd say there's good opportunities for growth and adjacencies there. And then our ComTech business, where we did our first bolt-on last year, which is performing well. which is really opening some doors. We're really seeing the synergy opportunity there. We actually see some nice opportunities there as well. So those would be, I'd say, three of the platforms that we see some attractive opportunities in front of us. But overall, we feel really good, and we feel like we're in the early innings of our value creation model there.
spk04: Great. Thanks for the call, Eugene. Sure.
spk03: Our next question. I would like to ask first about the HVAC business. It sounds like the macro is going in the right direction.
spk08: So at this point, now that we've got three, four months under our belt, How are you feeling about the guidance range? You know, is there enough macro out there, enough projects that are, you know, filling up the queue that you could be towards the mid range or high part of the range? Any thoughts there?
spk05: Are you talking about engineer quality or Cincinnati fan? Is that what you're specifically talking about?
spk08: No, no, no. I'm talking about the HVAC segment as a whole. Oh, sorry. I'm sorry. Yeah, the $8.55 to $8.90 million in sales. And, you know, just wondering, you know, how are the projects filling up? It sounds like the macro is going in the right direction. You know, I guess maybe the question is, you know, what takes us to the low end of that range and what gets us to the high end of that HVAC guidance range?
spk05: Yeah, why don't I start there? I would say on the demand side, and as you'll see in our bookings and our backlog, we are winning in the markets. And we feel very, very good about the demand profile as well as the value proposition of our products. And I thought you said EAQ engineered our quality, our newest product line, where we're also seeing very strong demand there since we've taken them over over the past quarter or so. I would say that the constraining factor for us is not going to be orders. It's going to be getting the product out the door. And so, Jamie or Paul, do you want to kind of give a little more color on what it would take, you know, for those ranges?
spk06: Yeah, I'd say, with what Gene said, I think, you know, what might take us to the low end of the range is obviously the slowing of the macro economy slightly. But, you know, we do have a lot of orders booked, so we'll be able to complete those. But really the labor, the labor pool, being able to get the labor in to get productivity and, you know, difficulties in supply chain would take us to the lower end. I think what would take us to the higher end as we really the same factors going in a positive direction, I think if we can continue some of the momentum that we're beginning to see build with some labor availability, continue to see some supply chain improvement, that would move us towards the top end. And I think if we were to see prices move in a positive direction, i.e. down, with some of our key components, that would also help us. One of the constraints that we have from a margin perspective right now is we do have some backlog to work through that's got some current pricing, some current costs, but some pricing that was put in place back in the fall. So as we see some of our costs potentially move down, that would clearly help us move towards the upper end.
spk08: Okay, great. Thanks for that. And switching over to the DNM segment, what do you attribute the locator growth to, and is that something that's sustainable in the second quarter, second half?
spk05: Yeah, I think location and inspection, I feel really good about that platform. As you know, that's our dominant platform in detection measurement. That's, let's say, 60% of our, or more than half of our segment. I would say our locators, which I would include Ground Penetrating Radar, as well as our Seanstead brands, really have just done very nicely. I think they've done good on innovation, and I think they've done really good on digital We've rolled out a new digital solution there for that with our largest customer. That's going very well, and we're seeing a good amount of activity there and a very strong interest with some other customers. If I go to our Q's brand, really the underground robotics, we also have a digital offering where we had a cloud offering that we introduced last year that we won double-digit customers, and it is continuing this year and even moving faster. So overall, I feel very good about where we are there and the opportunities we see in front of us.
spk08: Okay, great. Okay, and also in DNM, you mentioned the project work that, you know, You know, there's a good funnel there for projects. If we do see orders come in, would those be for shipment at the end of the year, 2023? What do you think the timing could be?
spk05: So some of the bigger ones that we see and some that we're progressing nicely on or have been verbaled on are – One, I would say the demand profile for transportation has increased, the run rate, and then we're seeing more just of the midsize projects there. That would be a project that could be $1 million to $5 million, let's say. But then the very large projects, the $15 million plus, what we call the megas, we're seeing more activity there, and we feel very good about a number of those projects. What I would say is for those, I can think of several of those that we're currently in the process of, we would likely be awarded and booked in this year. But in terms of revenue impact, I'd say it'd be a combination of 2023 and 2024, if you look at it. And it's going to be a really nice tailwind for our transportation business. And then similarly, the one business that we've called out that has been, I would say, you know, that has been very flattish on growth has been our ComTech business. And where we sit today, we have seen a nice uptick in some of these larger projects. And so this is something that we're tracking as well. So yeah, we feel We feel like the projects that we have in front of us for 2022, we feel very good about. And then as we look ahead to 23 and 24, we actually think that's going to be a tailwind for us.
spk08: Okay, got it. Okay, thank you.
spk03: Thanks, Paul. And once again, I don't want to find any questions. Our next follow-up will be from the line of Damian Carras from UBS. You may begin.
spk02: Hey, just a few follow-up questions here. Sure. So the last few quarters, I recall you calling out the backlog. Maybe you could just, I was wondering if you could give us an update there. Have you started working down that backlog or still building out?
spk06: Yeah, I would say we're working it sequentially, as an example. Our backlog on an organic basis taking out acquisitions was up 10% to 15% range, which is good. So we were able to get through some backlog. I think the really good news is we replaced that backlog with new orders. And as an example, our order base, sequentially, was actually pretty flat in our heating side of the business. Coming out of a strong demand quarter, moving into a strong order quarter in Q1 actually makes us feel really good about the demand profile there. And so I would say order book is good. We are working down the backlog, not as rapidly as we would like, but we still do have some productivity constraints from the labor and some of the components. But I'd say it's growing well More so because of the demand that was taught on production.
spk05: Yeah, and one thing I would also add is there was a pretty fair amount of COVID impact in January. So if you look at the amount of quarantining and some of the challenges there, it was very disruptive. And if you look at the run rate that we're currently tracking at in February and March and April, we are working down more of that backlog. So we actually, you know, believe we're on a more favorable trend there. So I think we're still winning in the end markets, and we are starting to make a dent in that backlog. But it did grow, you know, so it is, you know, and that's the good news. The good news is you win a lot of business, but you still got to get it out the door. And I think we are making progress towards accelerating that.
spk02: Got it. Makes sense. And then, Jamie, you mentioned, you know, if you pay down the debt, that's, you know, $0.11 of additional EPS. And then, you know, you kind of dangle this carrot out there on the $100 million of share repurchase authorization, you know, when you deem appropriate. So I just ask you guys, you know, when is the appropriate time, you know, stocks corrected? a good bit. You've got net cash on the balance sheet. In your guys' eyes, when would be the appropriate time?
spk06: That's a great question. We have a lot of feedback about a share repurchase from folks. We've been watching it ourselves. Stock's down 25-30% off its high. We feel like the stock has good value in it. You know, we have moved to a, not only do we have the authorization, we have all the execution mechanisms in place. You know, we've got some price targets in our mind about what that number should be. And, you know, we'll watch it closely and we'll be in the open market if we get those.
spk05: And what I would also say, Damon, is, you know, as you know, our focus since the spin has been on investing for growth. We think we have a really good flywheel here. And we, particularly with the completion of the disposition of really our power, we really have some attractive segments. But as you know, we have a billion dollars in our, you know, more than that in terms of balance sheet. And I actually think that share repurchases is a very logical addition to our portfolio of capital allocations. I still think the vast bulk of our investments will be in growth, but particularly with where our share price is today, I think it's very logical to have that as a portion of our capital allocation program.
spk02: Thanks again. Have a great evening.
spk01: You too, Damien. Thanks, Damien.
spk03: Thank you. I'm going to show you further questions in the queue. I'd like to turn the call back over to Paul Clegg for any closing remarks.
spk01: Okay, thank you, everybody, for joining us, and we look forward to catching you up again next quarter. Have a great evening.
spk03: This concludes today's conference call. Thank you.
Disclaimer