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spk00: good morning ladies and gentlemen and welcome to advanced drainage systems for quarter and fiscal year 2022 results conference call my name is juan and i will be your operator for today's call at this time all participants are in recent only mode later we will conduct a question and answer session if you would like to ask a question at that time please press star followed by number one on your telephone keypad. I would now like to turn the presentation over to your host for today's call, Mr. Mike Higgins, Vice President of Corporate Strategy and Investor Relations. Sir, you may begin.
spk01: Mr. Thank you, and good morning, everyone. Thanks for joining us for our call today. With me, I have Scott Barber, our President and CEO, and Scott Cottrell, our CFO. I would also like to remind you that we will discuss forward-looking statements Actual results may differ materially from those forward-looking statements because of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K on file with the SEC. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. Lastly, the press release we issued earlier this morning is posted on the investor relations section of our website. A copy of the release has also been included in an 8K submitted to the SEC. We will make replay of this conference call available via webcast on the company website. With that said, I'll turn the call over to Scott Barber.
spk03: Thanks, Mike, and good morning, everyone. Thank you for joining us on today's call. Fiscal 2022 played out largely as we communicated in February, with profit improvement occurring in the back half of the year due to multiple actions we took over the course of the year to improve pricing and operations. We closed out fiscal 2022 with a record $2.8 billion in revenue and $676 million in adjusted EBITDA, up 40% and 19% respectively. Our adjusted EBITDA margin was 24.4%, coming in at the high end of our guidance range. This fiscal year, we successfully managed through a number of challenges, including significant inflationary cost pressures, labor shortages, and two waves of COVID. Despite material shortages early in the year and persistent labor challenges, we were able to increase production and improve inventory levels to better service our customers, all while improving the safety within our facilities by double-digit rates. We employed $149 million in CapEx, primarily to drive organic growth more than any year in the history of the company. We also executed $292 million of share buybacks, and acquired Jet Polymers, a recycling company in the southeastern United States. I'm very proud of the performance of the entire operations team to help the company exceed our guidance ranges in this market environment. Domestic revenue increased across all end markets, driven by favorable pricing, as well as double-digit volume growth in the construction markets. as we continued our consistent track record of converting the market to our more environmentally friendly materials. Sales increased 45 percent in our priority states, with notable growth in Florida, Texas, and California. In addition, the 8 percent growth in the agriculture market displayed on slide four would have been even higher if we had had more available labor to run all of our production lines and available material in the spring season. In summary, the sales team did a great job executing our plan to meet the favorable demand we continue to see in the market. We finished out the year strong with a record $678 million in fourth quarter revenue, a 53% increase compared to last year. Sales growth was driven by both favorable pricing as well as construction market volume growth at ADS and Infiltrator. Agriculture volumes were down, driven by the cool, wet start to spring in the Midwest. Infiltrator sales increased 43%, primarily due to favorable pricing, with strong growth in the southeast and southern regions of the United States. The physical 2022 investments in Infiltrator continue to give us more capacity to work down the backlog, and order rates within that business remain favorable. Housing growth in the south, Midwest, and in rural areas remain strong where we have a better penetration of on-site septic products. Additionally, international sales increased 16% this quarter driven by growth in Mexico and the export businesses. We continue to leverage our Mexican and Canadian capacity to help service the strong domestic market demand and reduce our backlog. We have been working closely with our distribution partners to monitor market demand, and we collectively remain bullish on activity through calendar 2023. We continue to work programs with home builders and are encouraged by continued strength in land development. Our backlog is up double digit over this time last year, and we continue to work to reduce our backlog from peak levels through the recent capacity additions, improving service levels overall, Pace of orders and project strength remain favorable, as well as our ability to capture price in the market, which gives us confidence in the physical 2023 sales targets we issued today. April financial results were strong on a tough comparison to last year, which sets us up well for this year, in line with the guidance ranges we communicated today. To that end, we continue to invest in expanding our capabilities with investments in production capacity coming online at both ADS and Infiltrator in fiscal 2023. We plan to spend another $150 to $180 million on CapEx this year. These investments will allow us to continue working down the high levels of backlog build back inventory, and service the strong demand we continue to see in our end markets, particularly in key growth regions like the southeastern United States. From a profitability perspective, our adjusted EBITDA increased 78 percent this quarter. We realized the full benefit from price increases implemented through the first half of fiscal 2022, covering inflationary cost pressure on materials, transportation, and labor. We continue to face challenges around labor shortages and elevated transportation costs, which we expect to continue. Now, I want to highlight some other recent announcements. Earlier in May, we announced the acquisition of Coltec Inc. Coltec designs and sells plastic stormwater and on-site static chambers with a strong presence in the eastern United States. Their products expand ADS's portfolio of allied product solutions, enabling us to meet the growing and evolving needs of our customers. Coltech is well-respected within the industry, and we are excited to welcome the Coltech team to ADS. Finally, in a press release issued earlier this morning, we announced ADS's board chair, Bob Kidder, intends to retire at the end of his term this July and will not seek re-election. Bob has provided tremendous leadership and imparted timely advice throughout ADS's journey as a public company. His board knowledge and management experience are unmatched, and I'm personally very grateful for his guidance and partnership since I joined ADS in 2017. It is ADS's good fortune to have had Bob Kidder serve as board chair over the last five years, and I wish him success in his future endeavors. The board has elected Bob Ebersole, currently serving as chair of the audit committee, to serve as board chair starting in July. Bob has been on the ADS board since 2008 and brings a very strong background in finance and business management. I'm excited to work with Bob in his new role going forward. With that, I will turn the call over to Scott Cottrell to further discuss our financial results.
spk02: Thanks, Scott. On slide five, we present our fourth quarter financial performance. From a top-line perspective, we generated 53% growth year-over-year, driven by favorable pricing at both ADS and infiltrator, as well as strong volume growth in the domestic construction markets. Legacy ADS pipe products grew 61%, allied product sales grew 49%, and infiltrator sales increased 43%, with double-digit sales growth in both tanks and leach gold products. We continue to demonstrate our pricing power with significant year-to-date price increases across each of our segments. In addition, our pipe segment experienced double-digit volume growth in the construction markets this quarter. Consolidated adjusted EBITDA increased an impressive 78 percent to $169 million, resulting in 350 basis points of margin expansion to 24.8 percent in the quarter. Consistent with our guidance, year-over-year margin expansion began in the fourth quarter, and we expect to carry this momentum forward as we progress throughout fiscal 2023. The fiscal 2023 guidance issued today shows an 18 to 21 percent increase in adjusted EBITDA dollars, as well as over 100 basis points of margin expansion year-over-year. Moving to slide seven. We generated $126 million of free cash flow in fiscal 2022. In addition to the growth-oriented capital investments, working capital was a significant use of cash here today. We purchased raw materials and built inventory at a much higher cost compared to last year to support our strong demand. In addition, accounts receivable increased compared to last year, primarily due to the significant pricing we introduced into the market throughout 2022. As Scott noted, we will spend another $150 to $180 million on capital expenditures this fiscal year as we continue to invest at elevated levels to support the strong market demand we continue to see and work down our significant backlog. In the fourth quarter, the remaining balance on the company's outstanding ESOP loan was repaid. And effective March 31, 2022, the remaining unallocated shares of preferred stock were allocated to participants. In April, those shares converted to 12.8 million common shares outstanding. Closing out the ESOP is another way to thank our employees for the great work they've done throughout this dynamic year. As a reminder, in fiscal 2023, we will replace the ESOP compensation expense with an employer 401k match program, which will cost approximately $8 to $10 million annually. I'll direct you to the 8K we intend to file later today after the market closes that will present our earnings per share numbers on an as-reported basis as well as on a pro forma basis. Finally, on slide 7, we provide our fiscal 2023 guidance. Based on our order activity, backlog, and current market trends, we currently expect net sales to be in the range of $3.1 to $3.2 billion, representing growth of 12% to 16%. and adjusted EBITDA to be in the range of $800 to $820 million, representing growth of 18% to 21%, translating to an adjusted EBITDA margin of 25.7% at the midpoint versus 24.4% this past year. With that, I'll open the call for questions. Operator, please open the line.
spk00: Thank you. As a reminder, if you would like to ask a question, please press star followed by number one on your telephone keypad. If you would like to withdraw your question, please press star followed by number two. When preparing to ask a question, please ensure your phone is unmuted locally. And the first question comes from the line of Josh Bowinski from Morgan Stanley. Please, Josh, your line is now open. Hi.
spk07: Good morning, guys.
spk00: Good morning.
spk07: So just, I guess, a question, first trying to understand some of the volume comments, because the EBITDA waterfall shows that as a drag, but I think you mentioned, you know, up double digits in pipe. Can you maybe just sort of, you know, kind of explain where you're seeing maybe that volume shortfall, if I'm understanding the waterfall chart right, and then how much, you know, kind of deferred revenue or, you know, unexpected backlog build you have in the quarter?
spk03: All right. So this is Scott Barber, Josh. And if you look at that, you know, kind of fourth quarter chart, which I think is the one you might be referring to, you know, look at that non-residential and residential and think of very solid double-digit volume growth as well as the price attainment that we've been getting. And if you look at the agriculture, think of that as, you know, some price attainment, but, you know, pretty – volumes over a tough comp of a year ago, in addition to a very slow start to the agriculture selling season, which is what, like, 7%, 8% of our sales in total. And if you, one level, you know, one level deeper would be lots of good agriculture orders, but they're not released for shipment yet. And that kind of speaks to your, is that a delayed revenue thing? And I would kind of think about this coming year as not a great spring season for the agriculture business, but potentially a very good fall business if things, you know, if the weather's favorable and all that. It's a not only seasonal but highly cyclical segment. We're in the right part of the cycle now. We're kind of having a bad season, if you will, if that helps clarify.
spk07: Got it. That's helpful. And then just on 23 guidance, obviously a lot of volatility over the past, call it year and a half with inputs, especially on the resident side. Is there sort of an explicit price-cost benefit that you guys are thinking about in guidance? I know that the long-term targets laid out at the analyst day didn't really have anything, but just given that you can kind of see the whites of their eyes now, anything that you're building into this year?
spk02: Yeah, Josh, got control here. So, yeah, absolutely there is. When you look at the yield or pricing side of the house, really good momentum. Saw that in Q4 all year, really, as we kind of ratcheted that up. And we talked about run rate in Q3, Q4. We'll continue to take pricing actions as we deem appropriate and necessary. On the other side of that coin, though, we're very much keeping focused not only on resin, but what's happening with labor, transportation, diesel, all of those costs. So we've got those in our guidance with kind of assuming that those continue to be up well over what they were for the full year of 22. So we've kind of taken a realistic, we think, approach on what those costs are going to mean to us and then made sure that on the pricing side we continue to stay in front of that. So absolutely. That favorable spread, and again, starting with resin, absolutely the right thing to do, but we look at it as part of our manufacturing, labor, transportation, diesel, all in, making sure that this margin expansion story that we started here in Q4, and we've been talking about this all year, that we continue that momentum and we have that margin expansion line of sight as we move through Q1, Q2, Q3, and next year.
spk07: Great. Appreciate it, guys. Best of luck.
spk00: Thank you. Our next question comes from the line of Michael Horan from BERT. Please, Michael, your line is now open.
spk06: Good morning, gentlemen. Good morning. Good morning, everyone. So on the guidance, maybe just some thoughts on how you guys are thinking about the underlying demand patterns for the year by your end markets, if you're assuming that backlog normalizes as you work through the year. And any thoughts, as you see it, on sustainability of some of those end markets? Because obviously there's a lot of commentary on softening at some of the residential pieces, even some of the non-res pieces, like, say, the distribution center side. So any kind of help on the assumptions that you're embedding in the guidance would be really helpful.
spk03: Scott Barber here, Michael. And so there's a lot to unpack underneath that. But I think let me kind of boil it down to a couple things. You know, the first half of the year, you know, we look at continued growth in orders. And we say that because of our quote activity, the number of projects we're tracking continue to grow. and the sentiment that we get from the waterworks distribution we're out there talking to every day. And I spent quite a bit of time communicating with those guys over the last 30, 45 days, and they remain very optimistic and bullish about the projects and demand they're seeing and working on that's translated into us. We continue to work off some backlog as this capacity comes online, particularly if you think about an infiltrator. And the capacity that we've added there in the last year is working well for us, and we're able to get our lead times down on some of our products, what we're more accustomed to. And we're in the process of doing that. So that kind of all works its way through the first half. I'd say through our second half, we've kind of modeled it as a kind of normal year. You know, we don't have any kind of cliff out there. We don't have any kind of, you know, tailing off. We tried to model it as a more traditional year of more profit in the first half or the second half, you know, trying to base ourselves against what we would call average type of volumes in the second half. And we remain firm that we're going to hold our pricing and that, you know, we'll take our pricing up. You know, inflation gets – you know, we start to get hit worse. Like Scott said, we like where we're at right now. We got on top of it. It took us, you know, six months. But we feel good about doing what we said we were going to do and the performance in the fourth quarter. And I think you'll recognize that velocity of the fourth into the first will, I think, set us up well. But overall – On the demand side, you know, that's how we're kind of going at it.
spk06: Thanks for that. And on the free cash flow side, obviously you took on extra inventory this year to make sure you could get in front of some of the environmental challenges or the challenges in the environment, I should say. Maybe some help on how you think that plays out as we work through the year. Is this a year where you're going to see some normalization on the working capital side, or do you think you're going to have to keep some elevated inventory on hand to manage through the challenges?
spk02: Yeah, Michael, the way we think about working capital is it'll start to normalize. We'll hit and target kind of a 20% working capital as a percent of sales. We ended up last year, this current year, we just closed fiscal 22 at 21.8%. A little bit higher than obviously we like to be for all the reasons that we indicated with all the pricing that we got into the market, as well as that inflationary resident cost, plus building some of that inventory in that Q4 winter period, which we normally do. So as we look forward, we have not forecasted any of those costs or pricing come off. So those rates kind of stay at those elevated levels. So it's much more of just kind of a pounds and sales volume game. And so, again, we think that will be right at that 20% of – we're going to cap as a percent of sales target as we move forward. Thanks for that. Appreciate it, everyone.
spk00: Thanks, Michael. Thank you.
spk02: Thank you.
spk03: Good night. Go ahead.
spk00: Thank you. Our next question comes from the line of Carrick Moyes from Loop Capital. Please, Carrick, your line is now open.
spk04: Oh, hi, thanks. Thanks for having me on. I was just wondering if you could expand a little bit more on what you're seeing on the cost side, whether it's on raw materials and polypropylene or on the transportation side. You had a nice deceleration sequentially released on the transportation manufacturing cost bucket, so just kind of curious if you could expand on that a little bit.
spk03: Okay. This is Scott Barber. Good morning. And, you know, you know how I think about this. I think about the raw materials. And, you know, raw materials are – you know, really rose up fast, kind of peaked in November, December. They've come down a little, and they've been pretty darn flat. And there's a mix underneath that between the polypropylene, the virgin high-density polyethylene, and the recycled. But in any given month, we're kind of looking, it's flat, you know, month to month to month. And looking forward, that's how Scott's kind of built it in. And if that moves up, we'll take action. From a labor standpoint, you know, our labor costs went up a lot last year. There's some full year effects of that. Plus we're going to be, you know, mixing up our labor rate a little bit more than we have in the past, you know. And so you'll see, though, we're covering that now, but you've seen that elevated. Transportation, you know, we could talk all day long about our fleet. But think of it this way. What you might be seeing in the van market of a decrease, not so much in the flatbed market, which we tend to play. So we're not seeing deflation in what I would call our contract trucking. It's kind of steady right now. But we continue to have a shortage of drivers. And so we're running more on outside fleet than our fleet than we like. We're using some contract drivers, which are a lot more expensive than than our drivers to drive our own equipment, and we're doing that for capacity reasons, so the transportation costs remain elevated. Now, we've baked that into our pricing models because that's part of the service we provide, and I believe if you look at that fourth quarter, you know, we kind of got on top of it. Actually, we got on top of it in the third, and we got on top of it in the fourth. In the first and second, we didn't. You know, just to elaborate a bit, you know, our communication, we believe, was very consistent throughout the past year, you know, FY22, that, boy, it came on us hard. It came fast. It took us six months to get that pricing in the market. It was going to be a back-half-loaded year, and it was going to be dollars. And I think we got that done nicely and exceeded our expectations. Now we come out of that where we can – continue to improve our profitability, getting back to a better rate, we put that in our guidance. I think that's maybe unique right now to put that in your guidance. But, you know, we think we're at the right place to kind of drive what you would think of as the normal execution that we've been doing over the last couple years to drive the revenues, the conversion, the allied products, infiltrator growth, drive margin improvement at a faster rate than sales, work our programs, our execution, all that kind of stuff. So we feel good about getting back on top of that.
spk04: Got it. And I just want to follow up on the EBITDA margin guidance that you provided in the investor day, the 400 to 500 basis points expansion through fiscal 25. You know, just given the, you know, world is ever-changing, you know, just kind of curious how you're thinking about that long-term guidance. You know, it's only been two months, but has there been any change at all about that? Holy crap.
spk03: Yeah. We've been pretty busy since we were there that day. I don't know if I thought about that, but let me take that. Yeah, go ahead. Let me take that, because we had this question the other day, actually, so this is a good question. So we gave you like 400 to 500 basis points, and we told you that was going to be front-end loaded in that three-year plan. So the guidance that we issued we think lives up to that promise at the investor day that we see a way to execute that. We have line of sight on that. So we're going to put it out there and – and work to do what we said we were going to do at the investor day that's how we kind of looked at it and as far as you know these next couple of years i i still think that's our goal we're not going to change our the three-year goal you know based on you know the last couple of months which has been pretty chaotic i would agree uh with a with a war starting and and all everything else but We're not going to move off that. We're not going to move off that.
spk02: Gary, the point I would add to Scott's comment there is what gives us that confidence in that three-year plan, in addition, is that conversion story, right? You can look at the end markets and you're entitled to your view of what's going to happen there. But we always talk to 1 to 200 basis points above our end markets is what ADS historically has done. It's been much greater than that over the last couple years. So we see that conversion story accelerating. We've talked about the strength in April. We've talked about how we've ended fiscal 22, our pricing power. We've got a lot of levers, and we've got a lot of diversification that adds to the strength of this company and what we can do. So we are still very bullish on the future. And there would be nothing that we see right now that would be changing those guardrails. Okay, sounds good. Thanks again.
spk00: Thank you. Thank you. As a reminder, to ask any further questions, please press star followed by number one. As a reminder, to ask any further questions, please press the star followed by number one on your telephone keypad now. The next question comes from Matthew Ball from Barclays. Please, Matthew, your line is now open.
spk05: Matthew Ball from Barclays. Hey, Matt, you there? Yeah, hey, sorry about that. Sorry about that. Yeah, I'm here. What I said was, good morning, and thank you for taking the questions. So, the first question is just, given, you know, all the price you've taken and sort of the broader challenges with inflation, you know, are you expecting to see any pushback from customers on price or, you know, elasticity on volume, you know, just any larger customers or channels that where that risk, you know, keeps you up at night?
spk03: Scott Barber here. Matt, you know, I always worry about that. You know, the most price-elastic market we have is the agriculture market, and we work hard to be very disciplined in our sales team and our leadership there, and they are about that pricing, and we've remained disciplined around that. So I don't think we're going to you know, back off of that right now in this environment. We worry about, of course, competition from competing materials. They have extraordinary inflationary pressures also right now. So we, I think we've mentioned in the past, you know, we see localized, you know, problems versus the the reinforced concrete pipe sometimes so we have very localized pricing to kind of deal with that but i don't feel like there's an over overwhelming or overarching channel geography or segment that is going to come in and and blow a hole through what we've been doing is that is that is that clarify a bit
spk05: It sure does. Thank you for that, Scott. I wanted to zoom in on the residential end market. I know there was a question about broader markets earlier. I think you said at the top that you're still seeing strength on the front-end land development side, which is not that surprising. What are you hearing from customers on the front-end and as well on the back-end septic side?
spk03: you know new construction just just given all the concerns out there be helpful if you can kind of talk through some of the things you're seeing thanks all okay um so let's take the on-site septic which deals you know kind of around the housing completion stage and uh is as you guys all know you folks all know there's an you know a greater period of time between start to completion today than historically it used to be about six to nine now it's nine to twelve nine to fifteen So that's part of this backlog of infiltrator that's kind of extending out. And they also continue to see good order rates, particularly from those areas like the Southeast, the Midwest, rural areas, custom home areas. I was at their sales meeting last week, their sales and kind of big management meeting with everyone, and they're optimistic and bullish about what they see out there because they have great penetration, great distribution, good new products that they're introducing there. So let's just call it on the on-site septic side, and we think that there's a very nice volume and demand support there, and we think we're in good shape. On the land development side, we continue to, I would call, gain share with additional relationships with home builders being more and more involved in the early stages of their planning for kind of moving dirt to get their communities up and going. This is related to supply chain problems where they can't get other products. They might not be able to get concrete. We can help them with a good availability. In addition, we can help them with local regulatory matters and stuff like that. So that continues to be a real nice strength. I mean, Mike, you were just beforehand, we were talking, I mean, solid double digits. solid double-digit in both the fourth quarter and our backlog there. And I think they're going to be with, you know, two of these home builders, you know, next week, you know, with the senior leaders and kind of the channels that we – the organizations we work with down there. So I guess I feel pretty good about both of those, Matt. I mean, we're – I'm not saying that there's not – you know, interest rates don't matter and all that stuff. It does. But I think where we're positioned, the programs we're working on, all support this guidance that we just gave you in the three-year outlook that we gave you a couple months ago.
spk01: Yeah, I would add to Scott's point about the relationships we have with the builders. I think our visibility, communication has never been better there. So, you know, and I know all you guys follow the builders and what you hear from them is, you know, the same type of it's not a demand problem. They don't have a selling problem. It's kind of a building problem. So, you know, they still seem to be very positive on acquiring land, starting communities, building homes. to meet the demand that there is for single-family construction.
spk03: And our distributors say the same thing. That's what's so encouraging is when we're with the senior leaders from our distribution, they're watching this just as closely as we are, and they remain very confident about demand levels in the residential segment.
spk05: Wonderful. Well, that's really great, Collar. Appreciate it. Thanks, guys, and good luck.
spk03: Thank you.
spk00: Thanks, Matt. Thank you. Our next question comes from the line of Jon Powinski from Morgan Stanley. Please, Josh, your line is now open.
spk07: Hey, good morning again, guys. Just wanted to follow up on the warehouse and e-commerce fulfillment market. I know it's not the biggest piece of what you guys do, but it's gotten some airtime over the last couple of years. I think you've heard from the integrators, from the likes of Amazon, that they're kind of tapping the brakes there. I get that the world is sort of bigger than one player, but are you guys seeing any change there or any kind of new project mix or anything that would sort of be worth pointing out as maybe an inflection point one way or the other?
spk03: So that's a good question. And, yeah, it has gotten a lot of airplay. We've grown nicely in that market. It's been a big focus for us. And, yeah, So here's what we are hearing, and again, our team is going to be out there here in the next couple weeks to meet with some of the large developers in that segment. Nothing has stopped. There are some things that have moved out by a year in what I'm told is kind of the last mile or sub-regional type of facilities that they were planning. that they continue to be bullish on the bigger facilities. Now, this is what I'm told. We haven't seen any degradation in our order book or anything like that or the projects. So I think that's yet to come, Josh. You know, those activities by – by some people out there. That said, and Mike Higgins, we talked about this just the other day, there's a tremendous shortage of available warehouse space. So particularly out in the West Coast and in the Eastern Coast, up East. So we continue to see very strong, you know, project tracking and quotation activity in those areas. So the other players, I think, will still be doing some of this. But there is that, there is that, potential change in behavior of a major player in that area.
spk07: Got it. That's helpful. And then just one more follow-up, if I could, on residential. You know, obviously, if there's like, you know, municipal services and, you know, water, wastewater like that, you know, not as much of a content opportunity for you guys. Any sense for what home builders are sort of scooping up in terms of land activity? Is it more of the rural stuff where you guys would get you know some of the higher content on things like septic or you know are they kind of building more land a little closer into town i would imagine like the the choice of land location probably matters a lot for you know for advanced drainage for on-site septic you're absolutely correct that the the it matters a lot and uh you know here's my sense is that those top 10 home builders
spk03: the on-site septic participation in there is probably less than the 33 percent, you know, of the overall market. You know, we tend to do well, like you said, in the rapidly, rapidly growing areas, areas of 10 or 20 home development, not 200. Now, I'm sure the Infiltrator guys will listen to this and give me 10 examples where I'm wrong. But, you know, I do believe there is a different mix with those big guys. And these smaller builders doing 10 homes, you know, 15 miles outside the Beltway, I mean, that's our bread and butter. You know, the South, the Midwest, call it the semi-rural areas, which are growing very rapidly. You look at those counties, they're growing very rapidly. That's where we have very superior participation.
spk01: I was going to say, think of their business being with more regional, local, custom-type home builders. Right. versus uh you know the much larger public builders for the most part and i think just the other point to remember too is you know roughly 30 of their businesses repair and replace so that that's very steady it's on existing homes You know, the system is old, so it's an old pipe and stone system. It gets replaced with plastic chambers. Or, you know, hey, there's more activity going on in the home. You have more people living there. You've expanded it. You need a bigger leach field, a new septic tank, et cetera. Got it.
spk07: Super helpful. Thanks, guys.
spk00: Thank you. We currently have no further questions, so I will hand over back to Scott for any final remarks.
spk03: All right, thank you very much, and we really appreciate the questions and the participation today from you all. You know, just a couple of comments to wrap up. I mean, I think we issued pretty strong guidance for next year. We're very confident in it. You know, we have line of sight on that. We have the right programs and execution to do this plan. I think, really importantly, we had this right velocity plan. out of the fourth quarter into FY23. We feel very good about that and what we achieved in FY22. We have programs defined. We have an execution orientation. We've got management processes in place. to achieve this year and those long-term goals. I thought that was a good question by Garrick, you know, how does this fit into the long-term? And I think we've got that well dialed in. We can always do better, and we strive to do that, but we feel very confident about where we are. And then last, you know, I want to thank our employees. You know, before we got on today, Mike said, you know, it feels like it was two years ago that we were having the kickoff for FY22. It's been a long year. There's been lots of twists and turns, but our employees and operations, sales, our SG&A employees, our transportation, the network, guys working in the yards, our truck drivers, I mean, this was a lot, very different from the year before, but still a lot of hard work, and I'm very appreciative. of all that they put in in the support that our board gave us through a lot of twists and turns. So we look forward to the subsequent conversations, and thank you all for joining.
spk00: This concludes today's call. Thank you so much for joining. You may now disconnect your lines.
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