38 annotations
We're seeing the shift in Q1, which should be complete in Q2, of moving to a more normal distribution of having the vast majority of our shipments in the quarter based on book-and-bill, that is, new orders coming in that get turned around in the quarter. The things that hampered us in Q1 were the lingering tail of those past-due backlog items that we talked about taking a little bit longer than Q1 to clear out, as well as some continuing component challenges, and then the shift to being able to build safety stock to be able to handle those incoming orders.
natural correction in shipments as eaay lifting done befoe
Transcript
2024 Q1
2 Feb 24
But we do expect that that order recovery is going to be broad-based across our key industries, including in discrete and hybrid, to complement the continuing good performance in process such as oil and gas.
broad based order recovery
Transcript
2024 Q1
2 Feb 24
ndy, we ended last year with a backlog of $4.1 billion all in, and it went down high single digits in -- during the first quarter.
In terms of what we're seeing with orders, you're exactly right, we're seeing an inflection up in the orders from the Q4 trough. And we're expecting that to continue into the second quarter of double-digit growth into the second quarter.
In terms of where that -- where we're seeing that, I'll turn that over to Blake.
backlog and orders colour
Transcript
2024 Q1
2 Feb 24
Our outlook for fiscal year '24 is based on an acceleration of new product orders as distributors and machine builders reduce excessive inventory.
orders outlook
Transcript
2024 Q1
2 Feb 24
Given the split of sales between first and second half, that means first half margins will be noticeably lower compared to the year prior and second half margins noticeably higher.
take of two halves
Transcript
2024 Q1
2 Feb 24
As Blake mentioned, orders inflected upward sequentially, and we expect strong sequential order growth through the remainder of the year. The expected slope of orders is consistent with what we have discussed over the last couple of quarters.
orders growing
Transcript
2024 Q1
2 Feb 24
Adjusted EPS is slated to grow 5% year-over-year at the midpoint, again, weighted to the back half of the year. And we still expect free cash flow conversion of 100%.
back half weighting
Transcript
2024 Q1
2 Feb 24
We continue to expect our full year orders to grow low single digits versus prior year, with strong sequential growth through the balance of this fiscal year.
orders still to grow lsd in 2024
Transcript
2024 Q1
2 Feb 24
Segment margin of about 17% and adjusted EPS of $2.04 were both down versus prior year. The adjusted EPS was below our expectations, and Nick will discuss this further in a few minutes.
adjusted eps below expectations
Transcript
2024 Q1
2 Feb 24
n addition to a strong funnel of these warehouse transformation projects, we're starting to see renewed CapEx plans from our e-commerce customers for fulfillment center builds later in fiscal year '24 and in fiscal year '25.
e-commerce and fulfilment ordrrs later in the year
Transcript
2024 Q1
2 Feb 24
Wow, great detail.
On the orders, how much of the headwind was actual -- or actual cancellations I'm not sure I caught that earlier, what the actual cancellation number was.
Blake Moret
Yes. The cancellations were in a similar range to what we've been talking about, which is to say they were not the major contributor to the orders decrease. The main contributor by far to the orders decrease is the high inventory levels at the distributors.
So cancellations were a relatively small piece of it. At this point, clearing those final golden screw or fourth wheel constrained components to be able to allow distributors to shift complete bills and material is also a smaller component of the overall contributor to the orders down in Q4.
cancellations?
Transcript
2023 Q4
6 Nov 23
Yes. And Jeff, just to go a little deeper in that, we're seeing, one of the dynamics we're seeing in Q4, and we expect to continue through Q1 as well is our channel partners, our distributors working to rightsize their inventory as we are seeing as they are seeing good reductions in our lead times. They're doing the right actions of bringing their inventory levels down and that's resulting in lower orders being placed on us.
And we expect that to continue through Q1 and we think Q2, as we -- and as we discussed with all of our distributors, in Q2 is where that will start to change where the inventory levels at our distributors will be reaching the normal level that they expect.
So partly, I'd say that, just to say, we don't really see this level of orders we're seeing now is normalized. We're seeing them the correct reaction to the actions they're taking to bring their inventory levels down.
Blake Moret
And if I could add to that.
So our distributors are seeing a higher level of incoming orders that they in turn are placing on us due to their high inventory levels.
So we have, as you would imagine, very good visibility into our distributors' incoming orders from their customers from the end users and the machine builders, and that order activity is higher than what they're in turn placing on us.
So that gives us additional confidence that orders will ramp up as their inventory situation comes down.
deep colour on invenrity
Transcript
2023 Q4
6 Nov 23
I just wanted to come back to kind of orders and backlog. I'm just kind of confused by the comment that orders ramped during Q4. Right. I mean the ending backlog at $4.1 billion, you were guiding $4.5 million to $5 million. I know you pulled forward $100 million in sales, right? But maybe just bridge us on what happened other than that sales pull forward. How much of it was cancellations versus just kind of regular way order normalization, if there's a way to do that?
Blake Moret
Sure.
Let me make a couple of comments, Jeff, and then Nick may have something to add as well.
So we saw orders increasing if you look at beginning of the quarter of to the end, we saw orders exit at a higher rate than at the beginning of Q4 and then with a good uptick from that sequentially in October.
So that was the ramp we were talking about and why we believe that Q4 was the trough for orders.
orders colour throygh the quarer
Transcript
2023 Q4
6 Nov 23
Significantly improving lead times in our Q4 shipment overperformance contributed to rapid backlog reduction in the quarter.
lead times signioficajty improved matters
Transcript
2023 Q4
6 Nov 23
The lead times on our products have largely returned to prepandemic levels with the remainder of our SKUs getting back to normal lead times around the end of our fiscal Q1.
lead times normalized
Transcript
2023 Q4
6 Nov 23
Orders and backlog were up sequentially in the quarter. Order cancellation rates were flat to prior quarter and remain in the low single digits through January.
orders/backlog/csancellation rates
Transcript
2023 Q1
6 Nov 23
rendan Luecke
So I just wanted to double click on the cancellation trends. They’ve ticked up a little bit over the last couple of quarters. I guess two questions here. One, is there a root cause? Or is this just noise in the numbers? And then two, just a point of clarification. The 1%, 2%, 3%, are these quarterly cancellation rates? Or is that an annualized rate?
Blake Moret
Yes, those are quarterly rates and I’d put them more in the noise category. I mean, these are rates that are low single digits and they’re well within the range of what we’ve seen historically
cancellation rates?
Transcript
2022 Q4
6 Nov 23
But as we’ve been saying and as we’re now seeing as lead times in certain areas become – start coming down and our levels of customer service are increasing, we’ll see those orders and those shipments converge, but they remained well above pre-pandemic order rates. Nick?
Nick Gangestad
Yes. I don’t think I have much to add to what Blake said there. We – I think, particularly in the second half of the year, if we started to see some reduction in the backlog driven by reductions in our lead times, we would see that as healthy.
reduction in backlog driven by lead times coming down -- expected sand "healthy"
Transcript
2022 Q4
6 Nov 23
Got you. And just to understand in terms of your backlog and as you look into 2023, what percent of your revenue is underwritten at this point by the existing backlog? And how does it compare to sort of a normal year end? Thanks so much.
Blake Moret
Yes.
So, Nick will add some additional details to this. But we have about 60% of the full year in backlog. Typically, we have about a month. Most of our products are delivered off of a distributor shelf or very quickly from one of our factories either drop ship or through the distributor.
And so having well over half the year of our shipments in the guidance in backlog is absolutely unprecedented. And you see the slide that we posted to kind of show the development of that across all three of our business segments.
backlog/revenue/ttypically 1 month but now60%
Transcript
2022 Q4
6 Nov 23
Our backlog now represents over 50% of our fiscal year 2023 sales guide for both of these segments. This unprecedented backlog coverage adds to our confidence in our revenue outlook.
Our backlog also includes the benefits of price increases that were implemented throughout fiscal year 2022.
backlog reprsesnts 50% of sales guidance for 2023 for two segments
Transcript
2022 Q4
6 Nov 23