Franklin Electric Co., Inc. (FELE) Q3 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Franklin Electric Reports Third Quarter 2022 Sales and Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question and answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Taylor, Chief Financial Officer. Please go ahead.

Thank you, Catherine. Good morning and welcome everyone to Franklin Electric’s third quarter 2022 earnings conference call. With me today is Gregg Sengstack, our Chairperson and CEO. On today’s call, Gregg will review our third quarter business highlights and I will discuss our third quarter financial details. When we are finished, we will have time to take questions. Before we begin, let me remind you that as we conduct this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements. A discussion of these factors may be found in the Company’s annual report on Form 10-K and in today’s earnings release. All forward-looking statements made during this call are based on information currently available and except as required by law, the company assumes no obligation to update any forward-looking statements. With that, I will now turn the call over to our Chairperson and CEO, Gregg Sengstack.

Thank you Jeff, and thank you all for joining us. Our forward momentum continued into the third quarter. We achieved new financial records for all time quarterly performance and third quarter performance. On a consolidated basis this was the highest net sales for any quarter in the company’s history reflecting the continued strong demand in our end-markets and a solid execution by our global team. We would not have been able to achieve these results without the dedication and commitment of our employees who continue to manage through the obstacles presented in the current operating environment. End-market demand remains healthy with all three businesses experiencing double-digit top-line growth. This strength reflects the continued global demand for Water and Fueling System products, as well as our distribution offerings. Further, our backlog remains elevated at approximately $250 million, down about $40 million from the second quarter due to progress made on past due shipments and normal seasonality. Our backlog is still elevated about four-folds from levels before the pandemic. Operationally the third quarter was similar to the previous quarter, although we did experience some improvements in our supply chain. We continue to remain focused on reducing inventory levels, which have been higher throughout the year due to cost inflation, supply issues, and longer lead times and drive free cash flow and higher cash conversion levels. We expect supply chain performance to improve, albeit gradually through the end of this year and into 2023. In the quarter, we delivered operating margin expansion across each of our three businesses. Despite inflationary headwinds, our team exhibited resiliency through disciplined operational expense control, notably in SG&A, which as a percent of revenue was 340 basis points lower than the third quarter of 2021. Turning to our segments, Water Systems delivered record third quarter sales and operating income with overall revenue growth of 12% and operating income growth of 25% led by strong organic growth in all geographies. Excluding foreign currency translation, organic growth was 19% led by strong end-market demand in ground water pumping, surface pumping and water treatment. The segment also delivered operating margin of 15.5% for the third quarter. In U.S. and Canada, organic growth for Water Systems is 13%. Sales of groundwater pumping equipment increased by about 12% and sales of all surface pumping equipment increased by about 22%. Outside the U.S. and Canada, Water Systems organic growth was 27% with a strong growth in all regions of the world. We continue to see steady demand within our Water Systems segment supported by strong commodity crop prices and dry weather in the United States and other regions of the globe. We believe these factors, combined with the stability of our business due to the high-level replacement demand will continue to drive the business going forward. Our U.S. distribution business also delivered record sales for any quarter in its history, as well as record third quarter operating income, growing 38% and 54% respectively. The segment delivered an operating margin of 9.8%. These results were driven by previously mentioned solid demand in the U.S. groundwater market, price realization and the acquisition of Lake Equipment at the beginning of the year. Our distribution team continues to deliver strong results underscoring the segment's role as a major growth driver for our company. Our Fueling Systems business delivered record sales and operating income for any quarter in its history with overall revenue growth of 11%, operating income growth 20%. The segment delivered a strong operating margin of 31.7%. Organic growth was 13%. Sales in the U.S. and Canada increased by about 11%, compared to the third quarter of 2021. Outside the U.S. and Canada, Fueling Systems revenues were up and sales growth in India and EMEA offsetting weak sales in China. Again, many of the tailwinds we've experienced over the last several quarters remain the same. Strong demand continues to be fueled by major marketers investing in new locations in the U.S. and Canada, as well as a greater focus on vapor recovery, environmental management and monitoring outside the U.S and Canada. One cannot ignore the headlines about inflation, higher interest rates, potential recession in the U.S. and a tough winter in Europe. At the same time, the pandemic and recent geopolitical conflicts have shown the fragility of food, material and energy supply chains globally highlighting the need for an expansion of agriculture, mining and energy infrastructure. As a global provider system to move water and fuel with a significant footprint in developing regions, we believe these catalysts will add to the current strong demand for our products and systems. Our capital allocation strategy remains unchanged and we will continue to make investments to further grow the business, as well as returning cash to our shareholders through share repurchases and dividends. With the continued strength in U.S. dollar, we are especially focused on investment opportunities outside the U.S. to strategically expand our product offering. Turning now to our outlook, our stronger-than-forecasted performance in the third quarter more than offset the higher-than-anticipated headwinds to earnings from foreign translation and exchange losses in the quarter. As a result, we are revising our full year 2022 net sales guidance to be between $2 billion and $2.1 billion with our 2022 full year earnings per share, excluding restructuring to be in the range of $4.08 and $4.18, reflecting an increase in our earnings per share guidance midpoint from $4.10 in our previous guidance to $4.13 in our updated guidance. I'll now turn the call back over to Jeff.

Thanks, Gregg. Overall, it was a record third quarter performance for the company and our operating segments. We established new third quarter company records for consolidated revenue, operating income and earnings per share. Our fully diluted earnings per share were $1.24 for the third quarter 2022 versus $0.98 for the third quarter of 2021. Third quarter 2022 consolidated sales were a record $551.7 million, compared to the 2021 third quarter sales of $459 million, an increase of 20%. The increase from acquisition-related sales was $28.3 million, while organic growth contributed 20%. Sales revenue decreased by $24.9 million or about 5% in the third quarter of 2022 due to foreign currency translation. Water Systems sales in the U.S. and Canada were up about 16%, compared to the third quarter of 2021 due to acquisition-related sales, price and volume. In the third quarter of 2022 Sales from businesses acquired since the third quarter 2021 were $5.6 million, Water Systems sales in the U.S. and Canada grew 13% organically in the third quarter. Sales of groundwater pumping equipment increased by about 12% and sales of all surface pumping equipment increased by about 22%, all due to strong end-market demand. Water Systems sales in markets outside the U.S. and Canada increased by about 6% overall. Sales revenue decreased by $22.4 million or about 22% in the third quarter 2022 due to foreign currency translation. Outside the U.S. and Canada, Water Systems organic sales increased by about 27%, led by higher sales in Europe, Middle East and Africa markets. Additionally, the company had higher sales in Latin America and Asia Pacific markets. Water Systems operating income was $45.5 million in the third quarter 2022 up $8.7 million or about 24% versus the third quarter 2021. Operating income margin was 15.5%, an increase of 140 basis points, compared to the 14.1% in the third quarter 2021. The increase in operating income was primarily due to higher sales. Operating income margin improved due to leverage on fixed cost from higher sales, price realization and cost management. Distribution achieved record third quarter sales at $193.2 million in the quarter, versus the third quarter of 2021 sales of $140.2 million. In the third quarter of 2022, sales from businesses acquired since the third quarter 2021 were $21.7 million. The Distribution segment organic sales increased 22% compared to the third quarter 2021. Revenue growth was from robust demand and strong price realization in all regions and product categories. The Distribution segment operating income was a record for the third quarter at $19 million, compared to the third quarter of 2021 operating income of $12.3 million. Operating income margin was 9.8% of sales and distribution, primarily because of revenue growth. Fueling Systems sales were a record $90.2 million in the third quarter of 2022 and increased 11% versus the third quarter 2021. Sales revenue decreased by $1.7 million or about 2% in the third quarter of 2022 due to foreign currency translations. Fueling Systems sales in the U.S. and Canada increased by about 11%, compared to the third quarter of 2021. The increase resulted from strong broad based demand across most product lines. Outside the U.S. and Canada, Fueling Systems revenues were up with sales growth in India and EMEA, offsetting lower sales in China. Fueling Systems operating income in the third quarter was $28.6 million, a new record for any quarter, compared to $23.9 million in the third quarter of 2021 driven by higher sales. The third quarter of 2022 operating income margin was 31.7%, compared to 29.5% of net sales in the prior year. The increase in operating income was primarily due to higher sales. Operating income margin improved due to leverage on fixed costs from higher sales, price realization and cost management. The company's consolidated gross profit was $190.6 million for the third quarter of 2022, an increase from the third quarter of 2021 gross profit of $163.1 million. The gross profit as a percentage of net sales was 34.5% in the third quarter of 2022 versus 35.5% in the third quarter of 2021. The gross profit increase on a dollar basis was primarily due to higher sales. In the third quarter of 2022, the gross profit margin percentage was down 100 basis points. While realized pricing actions are more than offsetting inflationary cost increases, supply disruptions are causing unfavorable absorption variances and higher inbound freight. Selling, general and administrative expenses were $109.4 million in the third quarter of 2022, compared to $106.4 million in the third quarter of 2021. SG&A expenses from acquired businesses were about $5.5 million. Excluding acquisitions, SG&A expenses were lower by $2.5 million. As a percent of sales total SG&A costs are lower 340 basis points over the prior year quarter. Consolidated operating income was $80 million in the third quarter of 2022, up $23.4 million or 41% from $56.6 million in the third quarter of 2021 despite an unfavorable foreign exchange translational headwind of an estimated $3.8 million. The increase in operating income was primarily due to higher sales revenues. The third quarter of 2022 operating income margin was 14.5% versus 12.3% of net sales in the third quarter of 2021. The increase in operating margin was primarily due to leverage on higher sales volumes and cost controls and SG&A spending. In the third quarter of 2022, we incurred unfavorable expense below operating income of about $5.5 million or $0.09 of earnings per share. These events are primarily related to transactional foreign exchange effects and unfavorable indirect tax settlement in a foreign jurisdiction and higher interest expense. The effective tax rate for the third quarter of 2022 was about 19% and before the impact of discrete events it was about 20%, essentially flat to the third quarter of 2021. The tax rate as a percentage of pre-tax earnings for the full year of 2022 is projected to be about 21%, compared to the full year 2021 tax rate of about 21%, both before discrete adjustments. Yesterday, the company announced a quarterly cash dividend of $0.195 that will be paid November 17th to shareholders of record on November 3rd. This concludes our prepared remarks. We will now turn the call over to Catherine for questions.

Thank you. [Operator Instructions] Our first question comes from Walter Liptak with Seaport Global. Your line is open.

Hey, good morning, guys. Great quarter.

Thank you, Walt.

Hi. I wanted to ask first about the distribution business and the profitability that came through there. You didn't call out mix just volume leverage. I wonder, does that tell us something about what the future profitability of this could be as sustainable or how should we think about kind of future margins?

So Walter I’d say this, generally, distribution business, as you may recall from the second, third quarters are our best volume quarters as we get the most operating leverage, mix quarter-to-quarter is a little bit hard to parse out because it really depends a little bit on how much of commodity types or commodity-based products are going through distribution versus, what I call, non-commodity. But generally this has the operating profile now with the distribution that has the scale that it has. So we are feeling more confident as opposed to the original kind of 5% to 7% range that we are systemically able to maintain higher profitability over the whole year recognizing that the first and fourth quarter will be lower than the second and third.

Okay. And how are you feeling about the part of that business, or I guess any parts of your business that are sold into residential?

Sure. So, the distribution business gives us a little bit of a closer view to the end-market in the U.S. groundwater space, which is a portion of our overall business and as we see it right now, we saw that the non-commodity products going through distribution were up about 10% in the quarter, as compared to last year organically. So we are seeing still strong end-market demand and as you've been following us for a number of years, you know that because it's such a high replacement factor is that we are continuing to see that demand and also because it's been relatively dry in some areas of the country, as well as some movement of population to more rural settings. So, all these have led to a potential market share gains of the distribution business and you are having that kind of level of increase over last year. So, we're seeing that well and then also our other distributors, independent distributors who buy our product we had good results in the quarter.

Okay. Great. Yeah, thanks for that. And then just another one just on fueling. How are you – great results there, how are you feeling about sort of the funnel for projects, some of your competitors who do more aboveground have seen some volatility there. I wonder if you could just comment on sort of the ongoing environment.

Sure, we're seeing good strength in the environment right now for us. As you pointed out, we are not in dispensers or aboveground equipment and dispensing equipment. So, we haven't had some of the volatility that they've had just because of the completion of the upgrade of the card readers. But we are getting some indications that out in 2023 that some build programs are going to be reduced a little bit. We are, at the same time, looking at the continued rollout of our – and acceptance of our fuel management systems and getting some good traction there as some competitor systems are becoming – reaching end of life. So, we feel good about that, but we are seeing some indications of a potential reduction in capital deployment by a couple of marketers out in the middle of 2023.

Okay. Got it. Thank you.

Thank you. One moment. We have a question from Michael Halloran with Baird. Your line is open.

Hey, good morning, everybody. This is Pat is on for Mike.

Good morning.

Sticking with Fueling quickly, can you maybe talk about the regional variants? I know you called out China being a little bit weaker. Can you maybe – can you maybe discuss the geographic variances in Fueling?

Sure. So, you may recall that there was a several year upgrade of double wall piping, underground piping in China and we had anticipated because of the Chinese government's focus on cleaning up – further cleaning up the environment that they were going to roll up, in-station diagnostics essentially monitor the vapor recovery systems that are in the gas stations. So that second leg has not occurred yet and so we are still waiting to see that happen and there is some opacity around China's activities and when that may or may not occur. So we've been seeing this kind of steady decline in more of a runrate than we've had in the past since China, which is more like sub-$10 million in revenue. Opposite to that we are seeing a big surge in India. India is more deliberate about vapor recovery and they're doing initially what's called Stage 1 vapor recovery, which is retrofitting the tanker trucks, so that they are called bottom loading so that they can contain the vapors of the trucks and the transport them back once they dump the fuel to gas station and they can transport the vapors back to the fuel depots and we'll keep a closed loop system. You need to have Stage 1 before you really can get surge about Stage 2 vapor recovery, which is related to the automobile. So we are seeing strong growth in India because of that and also because of Jio-BP, which is a joint venture between Reliance and BP putting in hundreds of gas stations up to a couple of thousand gas stations over the next couple of years and respect a portion of that equipment. So we are expecting to see some good growth in India. But, outside of that actually, across the globe, we saw our sales in EMEA growing, sales in kind of rest of Asia, Latin America, kind of flattish and we tend to see – Fueling tends to be a little more lumpy quarter-to-quarter depending on initiatives by either countries or major markets outside the United States, major markets outside the United States are typically oil – state-owned oil companies or large oil companies. So, that, I will think gives you a view if you have additional discrete question I can answer.

No that was exactly the color I was looking for, that was helpful. Thank you. Now if we switch gears a little bit, can you maybe talk about the variance between groundwater and surface pumping, I believe you called out low 20s in surface pumping and low teens groundwater. Obviously, great results for both products. But can you maybe talk about, maybe some of the variances in demand you are seeing between the two?

Sure. So over the last couple of years, our groundwater business has been doing really, really well, particularly in the United States for the reasons we stated earlier with both crops, dryness, demographic moves, so it's all been strong for our groundwater business, but it's been kind of absurd more recently by service pumping, particularly our large watering pumps and if you think about energy, infrastructure and energy security. You go back to 2014, we saw this tremendous falloff of rig counts and you and – and rig counts I think, across the globe, but particularly in the United States , and so that we use that as a bogey for the large to watering pump demand granted or other channels, industrial, but just talking about the energy sector for a minute, we are in a very different situation today. Rig counts are very low. They are growing with the – again, the focus on energy security. So we are seeing some strong demand again in our large watering pumps somewhat outsized compared to maybe some historical demand as we continue to see the capital being invested in this space and I think in part for accelerated energy security development, as well as just general demand and other channels as we've been growing our brand recognition. So that's really what has been driving the outsized growth in our Dewatering therefore our Surface Pumping business.

Thank you. That color is perfect and one last clarifying question from me. I know you said this in the opening remarks, but I want to make sure I heard you correctly. Talked about declining backlog sequentially, I believe I heard you say that it was a combination of seasonality, but also starting to see some catch-up. Just wanted to make sure I heard that right.

We …

I am typing up.

Yeah. We'd love to be selling out of stock, but over the last 2.5 years like many others, we've been struggling to recover on past dues and we saw – we saw material – meaningful improvement in our past dues, which is fundamentally the reduction in the backlog it reflected that. Plus there is seasonality or I mean, I recognize that there is a lot of focus on that there is going to be destocking in the United States and how is that going to impact every company and of course, we have exposure to the U.S. It's a big part of our business, but also we have global exposure. But the – what we are seeing is a catch-up on past dues, but there is a normal seasonality. We are a Northern Hemisphere-centric business, and so we see some slowdown naturally as we're go in for - into the fourth quarter.

Great. Thank you that’s exactly what I was looking for. I’ll pass it on.

Thank you

Thank you. We have a question from Matt Summerville with D.A. Davidson. Your line is open.

Thanks. Couple questions. First, when you look across the three businesses and the organic performance, how much of that was driven by price versus volume when you look the three businesses?

Yeah, Matt, good morning. Matt, I would say, it's continued to be pretty similar to what we've seen in past quarters - in the third quarter is it’s price is certainly the biggest piece of the organic growth that we are seeing. That's going to be north of or close to 75% of it in volume will be. The other piece when we exclude the FX impact, so the translational impact from foreign exchange when we cite those organic growth numbers.

So when we think about price realization at this point, have you fully realized and fully captured all of the benefit from the price actions taken into that end with certain commodities, steel, copper, aluminum, maybe even resin a little bit rolling over, certainly coming off peak. How should we be thinking about price realization going forward?

Yes, so to your first question is - is have we fully realized the pricing that's been put in place, I would say, not 100% fully obviously with the backlog that we have, we still have some product out there that's potentially not at 100% of the price increases that we've seen and then incrementally, we're still seeing pricing in certain areas. To your question on the commodities, yeah, we've seen some commodities turn over, but I would say in aggregate when we look at our cost we do still see inflationary pressures. And so, while copper may be down, we do see that oil and gas-based products, so plastics and resins, oil and gas is still high. Labor is still high, transportation costs are still above where they were. So the net of it is, is that while inflation may be slowing at some level, we are still seeing inflationary pressures and we are still incrementally pricing to recover those inflationary costs.

If you look at the Headwater business, how much of the product you sell here, because you referenced non-commodity, how much of the product do you sell through distribution that you would have categorized as commodity versus non-commodity. And on the commodity-related stuff, I would imagine that there is some element of material surcharges or temporary passthroughs that I would assume, again, because of what I mentioned, when you look at kind of some of the raw material indices may roll off. I guess I am trying to get a sense for when that may become a headwind to Headwater if I'm thinking about that the right way?

Yes, Matt, I think you are thinking about that the right way. Certainly, distribution businesses that we follow that are public information, it's been inflationary environment, they get some margin lift because they are passing through pricing almost immediately upon announcement by their suppliers. And so they get the advantage of revaluing or getting more margin on the inventory they have on hand. So the degree that they've been able to carry heavier inventories because of access to capital like in our case, that's served well. I'll bifurcate your question further on this saying that about a third of Headwater purchases are pulp-related products from Franklin. And I haven't actually done a split on this I'm just thinking out loud here is that when you think about commodity type products, which is wire, cable, pipe, things like that, maybe it's be what I'll call it, another 25% or a third of their business. And so in that case, that - they tend to price that in spot and so that part of the business actually, it's kind of a spot going forward. So I think they've been able to figure out, well, all these operators that we acquired are also with us. So they've gone through the multiple cycles business cycles. So, they pretty much are able to hold the margin on the commodity pieces from quarter-to-quarter from buy to sell, because they've been doing this for a number of years, if not decades. So, yes, I think you'll see some pressure on the gross profit of distribution businesses generally excluding Headwater in a maybe call it deflationary or less inflationary environment. But I don't think it's going to be a major hundreds of basis points changes.

And then, just lastly, one more on distribution. The quarter-on-quarter compression in OI dollars on slightly higher revenue, is that just mix related?

Yeah, I guess to this point of as pricing has stabilized and again, from a mix point of view, you just – you are seeing a bit of a compression there and we continue – we are bringing on new businesses. We have OpEx increases and we need to also be mindful of getting some of that OpEx streamlined. So, couple of little factors going on there, but we had great OpEx leverage generally across the business. So, to your point, again, it's I think it's a little bit more of a stabilization now at a new price level.

Got it. Thanks guys.

Thank you, Matt.

Thank you. And we have a question from Ryan Connors with North Coast Research. Your line is open.

Great. Good morning. Thanks for taking my call.

Hi, Ryan.

So, congratulations on the great numbers. It does really seem like you are bucking the trend of a more rocky earnings season out there a little bit. So, wanted to get us some of the reasons for that maybe, Gregg and you talked about resources in rig accounts. But are those investments really happening? It seems like a lot of the noise coming from the energy space is that there is not a lot of confidence in the political and regulatory backdrop and that there are economic incentives to invest, but people are still feeling like there is a target on their back and they are not really stepping up those investments like they did in the previous periods you mentioned back in 2014 and 2015. So, are there – can you cite any specific metrics there or to what extent is that really a driver?

It's just one data point that I looked at, Ryan. To help explain remember, when we saw a large falloff in our business in Pioneer and our dewatering pumps back in 2014 and they seem to correlate pretty well to rig count. To your point now, we do – and I appreciate you raising the question because we are more broadly based in the sale of the products. We have greater brand recognition. So the lift we're getting is, again much of it is coming through the rental channel, but the lift we are getting is broader based and it was the reason for the falloff back in 2014, so the business has more stability now going forward. But I'd point to the rig count because we are coming off a really low base. And so, as I – having been around here for a few years figure that, that's got to be a contributory factor to the restocking or - of the increase in capital asset investment in the rental space.

Yeah. Okay. And then, the other one I wanted to kind of dive into was, there is so much talk about water scarcity situation right now and I want to get your – a little more of a detailed take on how that really impacts you. I think, can we kind of – I know a part of what you guys do is you help people access groundwater and when we are in a severe water scarcity crisis. Is that here that there is just a lot of demand for, whether it's Ag, industrial, residential, people having to access water in those regions and that that's really a major driver here.

Ryan, a couple of factors. Water scarcity is certainly one, as water gets - to reach water that as water tables have fallen. You are going to need to use larger pumping systems, go deeper, you're going to want to pay up for the quality because if the system fails, it's not good, it costs a lot and potentially lost live stock crops and time to place products so people are going to turn and want to buy quality pumping system and bigger systems. So that's generally good for us. . The other thing that's going on with water scarcity, again, you are going to be – to agree that you're running systems longer, you have higher energy input costs. So people are going to be looking for more efficient systems. So again, we've modified some of the materials construction to have higher efficiency systems. And again, in long run cycle type environment, that's generally good for us. Also point out is that two-thirds of water is used in agriculture and most of it is not used very efficiently and as more use of efficient water distribution, which means getting away from flood irrigation and less efficient systems then they are going to typically get into more sophisticated pumping systems and distribution systems and that's generally good for us. So, there are several factors that we believe are - be driving kind of long-term benefits for Franklin products and our shareholders, but scarcity is certainly one of them.

Okay. And then last one for me was just on this - another area where you seem to be bucking the trend is there has been so much talk about this big picture inventory, destocking cycle across, sort of all sorts of different industrial products. It doesn't seem like that was a big issue. I know you don't sell – not everything you do is the "pump in a box" that's out and then on a shelf somewhere. But can you talk about that impact and how that's impacting you now and could be in the next few quarters, both on your manufacturing side as well as Headwaters?

Yeah, so clearly, we had a lot of news around destocking. As I mentioned, we are seeing – again, we have kind of a – we have another view into the U.S. groundwater distribution because of Headwater and Headwater is reducing their inventories much like they would this time of the year in past years to maybe a little bit more aggressively as lead times become a little more stable with their supply base including Franklin Electric, which is their largest supplier. So we - that's – I expect to see that, we hear from some of the larger customers in our residential business on the gray water side and on the surface pumps. We are seeing that there is some sensitivity there to stocking levels. But that's all offset by the fact that we've been struggling to keep up with demand that we demonstrated. So the visibility or the amount of the inventory for an excess inventory system is not exactly here and it may likely be lower in the groundwater space. And given the challenge we have had with delivery earlier in the year, we may actually saying this would position going into next year. But with long thoughts, I can't – I don't have that level of visibility. I know we are short segment in the U.S. for a country that is still in the U.S. which is like a main marketplace but outside the United States – improving business. But, so, our visibility is orders are good, demand is good, because of [Indiscernible] and that makes that more softening going into next year. But to your point, most of that move is like it’s not a lot it’s been what like been like this year.

Yes. Okay. Great. Thanks for your time this morning.

Sure, Ryan. Thank you.

Thank you. And I am showing no other questions in the queue. I'd like to turn the call back to Mr. Gregg Sengstack for closing remarks. End of Q&A:

Thank you for joining us this morning and look forward to speaking to you about our fourth quarter results in the start of next year. Have a good week. .

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.