Encore Wire - Q2 2022

Transcript

Operator (participant)

Welcome to the Encore Wire Reports Second Quarter 2022 Results Conference Call. My name is Richard, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press zero one on your touchtone phone. As a reminder, this conference is being recorded. I'll now turn the call over to Bret Eckert. Mr. Eckert, you may begin.

Bret Eckert (CFO)

Thanks, Richard. Good morning, and welcome to the Encore Wire Corporation quarterly conference call. My name is Bret Eckert, Chief Financial Officer of Encore Wire. With me this morning is Daniel L. Jones, President, CEO, and Chairman of the Board. In a minute, we will review Encore's financial results for the second quarter ended June 30, 2022. After the financial review, we will take any questions you may have. Before we review the financials, let me indicate that throughout this conference call, we may be making certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation, and instead of attempting to identify each particular statement as forward-looking, we advise you that all such statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed today.

I refer each of you to the company's SEC reports and news releases for a more detailed discussion of these risks and uncertainties. Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful supplemental information for investors, are posted on our website. I'll now turn the call over to Daniel for some opening remarks. Daniel.

Daniel L. Jones (Chairman, President, and CEO)

Good morning, everyone, and thank you for joining us on the call and for your interest in Encore Wire. We appreciate your continued investment, confidence, and support. The results for the second quarter of 2022 establish another high water mark, both financially and operationally for Encore Wire. Our continued strong earnings in 2022 validate that our single-site campus model is a strategic competitive advantage in the market today, giving us unmatched flexibility to quickly pivot and adapt to ever-changing market dynamics. Our manufacturing scale and flexibility, coupled with our value-added services, continue to drive job site efficiency. Stable demand coupled with global uncertainties, persistent tightness in the availability of certain raw materials, and the general inability of the sector to meet demand for the timely delivery of finished goods kept spreads strong throughout the first half of 2022.

By continuing to execute on our core values of providing unbeatable customer service and high order fill rates, we were able to increase both copper and aluminum volumes shipped in the second quarter and year-to-date periods in 2022 over 2021 levels. Volumes shipped were also up over first quarter 2022 levels. This marks the third consecutive quarter of volume growth, driven by continued increased demand for data center, healthcare, and renewable product solutions. We believe existing market conditions and the current outlook support existing volume levels as well as support gross margin abatement continuing at a gradual pace. Copper unit volumes increased 2.7% on a comparative quarter basis and 5.5% on a year-to-date basis. COMEX prices decreased gradually throughout the second quarter, while other raw material costs and inputs continued to rise.

Copper spreads increased 22% on a year-to-date basis, but decreased 4.4% on a comparative quarter basis. Aluminum spreads increased for both the quarter and year-to-date periods in 2022 compared to 2021. With the new capacity coming online this year, we believe Encore Wire remains well positioned to capture incremental market share and volume growth in the current economic environment. As we address the near-term challenges, we remain focused on the long-term opportunities for our business, including improving our position as a sustainable, environmentally responsible leader in our industry. We believe that our superior fill rates and deep vertical integration will continue to enhance our competitive position. As orders come in from electrical contractors, our distributors can continue to depend on us for quick deliveries coast to coast. I'll now turn the call over to Bret to cover our financial results.

Bret?

Bret Eckert (CFO)

Thank you, Daniel. Net sales for the second quarter ended June 30, 2022 were $838.2 million, compared to $744.4 million for the second quarter of 2021. Copper unit volume, measured in the pounds of copper contained in the wire sold, increased 2.7% in the second quarter of 2022 versus the second quarter of 2021. Gross profit percentage for the second quarter of 2022 was 38.3%, compared to 37.3% in the second quarter of 2021.

The average selling price of wire per copper pound sold decreased 0.7% in the second quarter of 2022 versus the second quarter of 2021, while the average cost of copper per pound purchased increased 3.2%. Net income for the second quarter of 2022 was $210.5 million versus $183.1 million in the second quarter of 2021. Fully diluted earnings per common share were $10.71 in the second quarter of 2022, versus $8.82 in the second quarter of 2021. On a sequential quarter basis, fully diluted earnings per common share of $10.71 in the second quarter of 2022 exceeded fully diluted earnings per common share of $7.90 in the first quarter of 2022.

Net sales for the first six months ended June 30, 2022, were $1.56 billion, compared to $1.189 billion for the first six months of 2021. Copper unit volume measured in pounds of copper contained in the wire sold increased 5.5% in the six months ended June 30, 2022, versus the six months ended June 30, 2021. Gross profit percentage for the six months ended June 30, 2022, was 36.2% compared to 30.4% for the first six months of 2021. The average selling price of wire per copper pound sold increased 15.6% in the first six months of 2022 versus the six months ended June 30, 2021. While the average cost of copper per pound purchased increased 10.2% for the same period comparison.

Net income for the six months ended June 30, 2022, was $372.1 million versus $224.2 million in the six months ended June 30, 2021. Fully diluted earnings per common share were $18.62 in the six months ended June 30, 2022, versus $10.81 in the six months ended June 30, 2021. Aluminum wire represented 15% and 13.4%, respectively, of our net sales in the quarter and six months ended June 30, 2022. Aluminum wire volumes and spreads have increased for both the quarter and six months ended June 30, 2022, compared to comparative periods in the prior year. The favorable market conditions for the second quarter ended June 30, 2022, were driven by stable demand for our products.

Persistent tightness in the availability of certain raw materials, ongoing global uncertainties, and suppressed availability of skilled labor kept spreads strong through the second quarter of 2022. This marks the fifth consecutive quarter of elevated margins and spreads. Our balance sheet remains very strong. We have no long-term debt. Our revolving line of credit remains untapped. We had $469.5 million in cash at the end of the quarter. During the second quarter, we repurchased 607,105 shares of our common stock. On a year-to-date basis, we repurchased 1,108,022 shares of our common stock for a total cash outlay of $131.9 million.

Since the first quarter of 2020, we have repurchased 2,224,829 shares of our common stock at an average price of $96.71. We also declared a $0.02 cash dividend during the quarter. The repurposing of our vacated distribution center to expand manufacturing capacity and extend our market reach was substantially completed in the second quarter of 2022. The incremental investments announced in July of 2021 continue in earnest, focused on broadening our position as a low-cost, sustainable manufacturer in the sector and increasing manufacturing capacity to drive growth. Capital spending in 2022 through 2024 will expand vertical integration in our manufacturing processes to reduce costs, as well as modernize select manufacturing facilities to increase capacity and efficiency and improve our position as a sustainable and environmentally responsible company in our industry.

Total capital expenditures were $75 million in the first half of 2022, compared to $118 million for the full year of 2021. We expect total capital expenditures to range from $150 million-$170 million in 2022, $150 million-$170 million in 2023, and $80 million-$100 million in 2024. Those ranges remain unchanged from last quarter. We expect to continue to fund these investments with existing cash reserves and operating cash flows. I will now turn the floor over to Daniel for a few final remarks.

Daniel L. Jones (Chairman, President, and CEO)

Thank you, Bret. The strong performance in the second quarter ended June 30, 2022, further attests to the strength of our one-campus, vertically integrated, low-cost business model, which continues to thrive under current market conditions. We wouldn't have this level of success without the consistent exceptional performance of our long-term suppliers. Our deep relationships and strong internal management team, coupled with consistent execution, positioned us favorably in the market, allowing us to maintain our overall low-cost structure. Looking ahead, we remain solely committed to execute upon the core values of our company: unbeatable customer service, nimble operations, and quick deliveries coast to coast. In addition, we have the best distributor partners and rep force in the industry. I want to close by recognizing our employees for their hard work and commitment to safety and excellence.

Our performance over the past five quarters could not happen without their extraordinary efforts. Our success in the market continues to allow us the opportunity to incrementally invest in our team as we position Encore as an employer of choice in the sector. I also wanna thank our shareholders for their continued support. Richard, we'll now take questions from our listeners.

Operator (participant)

Thank you. We will now begin our question-and-answer session. If you have a question, please press zero one on your touchtone phone. If you wish to be removed from the queue, please press zero two. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero one on your touchtone phone. Our first question comes from Mr. Brent Thielman from D.A. Davidson.

Brent Thielman (Managing Director and Senior Research Analyst)

Hey, thanks. Good morning, Daniel. Brent.

Daniel L. Jones (Chairman, President, and CEO)

Hello, Brent.

Brent Thielman (Managing Director and Senior Research Analyst)

Daniel, maybe first can you just talk about the aluminum business? I don't think we've seen that product at sort of 15% of revenue before. You know, what's behind the strength there and also the widening spreads?

Daniel L. Jones (Chairman, President, and CEO)

Yeah. There were a large number of projects that came online requiring the aluminum conductors, some of those in lieu of copper in an effort to reduce some cost from the quote perspective by the time the product was shipped or the PO was let. You know, additionally, we had some utility projects that included upgrades, hardening expansions, consumed some of the domestic aluminum wire capacity. You know, and there were some lockdowns in China that maybe prevented some of the import of aluminum wire. There was ocean freight, shipping costs, port congestion, you know, a lot of things that led to the aluminum growth for us.

You know, those factors that we spoke about created an environment to where, you know, we could ship on time and leverage it, in our capacity and our service level to meet the demand.

Brent Thielman (Managing Director and Senior Research Analyst)

Okay. Appreciate that. Daniel Jones, the way you guys talk about the supply side of some of these inputs, I guess in particular copper, it sort of seems at odds with what we're seeing in market prices today. I mean, any additional perspective as we sort of think about those conditions persisting?

Daniel L. Jones (Chairman, President, and CEO)

Yeah. There's a couple of things, you know, specific. The consumption side of the copper outlook, we see it as outpacing the supply side, you know, by a number. What we had in the second quarter, when you have copper prices decreasing toward the end of the quarter like we had, with this pretty strong pace on the demand side, you know, in a few of the sectors, you typically see a halt or a lack of commitment for inventory on the distribution side. It really feeds into our model of having the just-in-time delivery. We take on, you know, the added pressure to deliver maybe a few more job sites rather than into distributor inventory. We welcome that.

It fits our flexibility on the production side, and it really, you know, puts the new service center, added services and whatever to test, on those 88 dock doors. We saw some of that in Q2. The demand side is still good in a lot of sectors, and it puts, you know, the pressure on that copper consumption side. We still see it as being pretty strong. Hopefully, the prices will, you know, reflect that going forward.

Brent Thielman (Managing Director and Senior Research Analyst)

Okay. Appreciate that. On the demand side, I mean, I guess historically, I sort of think of Encore Wire as focused within the core of the house or a building, but it seems like the product, you know, has its place in some infrastructure applications, whether that's related to the electrical grid or EV infrastructure. Can you talk about some of those demand drivers, you know, whether those can be a meaningful place for Encore within all that?

Daniel L. Jones (Chairman, President, and CEO)

Yeah. Great question, Brent. What you know, we're seeing, as everybody is seeing, the pressure on the residential numbers and starts, there's a lot of conflicting data in the market when it comes to residential. You know, the RV market is still relatively strong, both in, you know, parked RVs and towable RVs and motorized RVs and what have you. But what we're really seeing, the consistent demand, you know, data centers, healthcare, in institutions, schools, universities, whatever, the industrial side is pretty strong, from an energy perspective and then, also in the renewables sector. A lot of strength in each one of those markets. You do see a little bit of the, you know, aluminum demand, versus copper, and then back and forth.

It's all pretty good across the board when you mention those four or five sectors. We're busy, incredibly busy. The second quarter was very busy for us. Really, you know, regardless of what happens in that residential sector for us, we're busy. We're doing other things, and the product's going out the door, and you know, the residential numbers are what they are.

Brent Thielman (Managing Director and Senior Research Analyst)

Okay. Appreciate that. Just last one for me, just doesn't look like any changes to the CapEx outlook from what you relayed last quarter. How are you approaching any sort of future plans that sort of could be added to what you've already laid out, just with the backdrop of what looks like some softening in the economy here in the last few months? I mean, how do you sort of assess that here going forward?

Daniel L. Jones (Chairman, President, and CEO)

Yeah. We keep an eye on it, Brent. We're moving ahead with our projects. Each one of the projects will either lower our cost or increase our service model. We're moving forward. You know, we're spending in that CapEx category, about as fast as we want to. Some of the projects are a little slower than what we would like. We're moving ahead. I mean, you know, you've got non-residential construction sectors that are experiencing some double-digit growth. We're moving ahead. The commitment to service and the constant, you know, striving to lower cost and finding ways to be better environmentally, all those things play into these expansions and CapEx projects, and we're moving.

We're gonna continue to move and adapt to the way the demand has shifted a little bit more, maybe away from residential specifically. You know, when you talk about some of the manufacturing and mining and hotels and commercial, a lot of the industrial projects, I mean, we're moving pretty quickly on all of our projects.

Brent Thielman (Managing Director and Senior Research Analyst)

Okay. Thanks, guys. I'll pass it on.

Daniel L. Jones (Chairman, President, and CEO)

Thanks, Brent.

Bret Eckert (CFO)

Thanks, Brent.

Operator (participant)

Thank you. Our next question online comes from Julio Romero from Sidoti & Company. Please go ahead.

Julio Romero (Senior Equity Research Analyst)

Hey, good morning, Daniel and Bret.

Bret Eckert (CFO)

Good morning, Julio.

Julio Romero (Senior Equity Research Analyst)

You guys talked about, you know, the end market demand being driven by data centers, education, renewables, decarbonization, and being a little bit more disconnected from like headline residential and non-residential, so to speak. You know, I was hoping you could speak on how does that translate to product mix. Like, what product lines are now as a result of that seeing increased demand as a result of those increased, you know, data center renewables being a bigger part of your mix?

Daniel L. Jones (Chairman, President, and CEO)

Yeah. Fantastic. It's the industrial cable, commercial cables that we make. Basically the non-res plants, the Armored Cable plant, we're busy in all categories. As you know, Julio, from you know, visiting here in the past, we're super flexible with our capacity. As the market continues to adapt and change, and the demand comes in for the other categories, that's more commercial and industrial product, traditional categories. We can quickly adapt our residential capacities to manufacture the products that we need to continue the high service level, which seems to be driving most of this.

Bret Eckert (CFO)

I'll just add to that, Julio. You know, these data center projects are increasing in size. Speed to completion has never been higher, and diversity. It's a lot more of the same that goes into that. The key is more of it and faster, right? Our one campus model allows us to pivot and serve that very well. We've seen expansion there. You know, we talked about the healthcare side. That's mainly low voltage. Whether that's expansion, whether that's new healthcare, or whether that's powering life-saving equipment, you know, our wire plays very well in that space. Then from a renewable side, GreenConnect products, power generation distribution solutions for solar, vehicle charging, battery storage, utility applications. It's a lot of what we've done.

I think this market is just, when you look at it, and you go back two years, right? There's five consecutive quarters now of elevated margins and spread, three consecutive quarters of volume growth as you go through this. You know, this market changes, right? Not just changing quarterly or monthly or weekly. It can change daily. Speed and fast beats slow. You know, you look at our ability, and we talk about this one campus model, how we're built from a service standpoint, take an order, ship an order. You know, we're able to move very, very quickly, and that's been a differentiator and continues to be a differentiator in the market we're in today.

Then when you overlay persistent tightness in raw materials, because that continues today, a very tight labor market, you know, we're able to continue to adapt, pivot, you know, move in the direction we need to move in, you know, whether or not those raw material costs are going up or down. I mean, you kind of saw the opposite trend. You saw what copper did, you saw what aluminum did. In the quarter, the results are still very strong, and that's just a testament to our ability to respond to what the market needs.

Julio Romero (Senior Equity Research Analyst)

Great. No, that's a great comprehensive answer. You are able to kind of flex your manufacturing capacity across product lines if needed. I guess my follow-up to that would be can your competitors do that? Can your competitors flex capacity to the extent that you guys can?

Daniel L. Jones (Chairman, President, and CEO)

You know, probably so. Back when I was in my twenties and thirties, you know, decades ago, they used to let me go through their plants. I've been through most of our competitors' locations, but it's been quite some time and, you know, I think all of our competitors are running their plants. Everybody's busy. I'm sure they've got some way of reacting. I'll leave it at that. Julio?

Julio Romero (Senior Equity Research Analyst)

Can you hear me or no?

Bret Eckert (CFO)

Now we can. You're back.

Julio Romero (Senior Equity Research Analyst)

Okay. Just on spreads, if you could just speak to how they've trended sequentially and, you know, as you exited June, how did that spread compare to maybe the spread for the second quarter overall?

Bret Eckert (CFO)

Well, let's just look sequentially. Fantastic question. I appreciate you bringing that up. I mean, net sales was up almost 16% over the first quarter. Gross profit, $38.3 in the second quarter versus $33.7 in the first quarter. You know, and then go back to the underlying dynamics that we talked about, which is the volatility in the raw material. It highlighted it's a lot more like we've been saying throughout this pandemic. It's just the metal, right? You still got to insulate it, cable it, and jacket it and armor it. You got to put it on a reel, right? You have to get it to the job site or to the distributor. All that goes into it with the labor component of making a finished good.

You know, gross profit moved almost 5 points from the first to the second quarter. You know, net income was up 40%. Earnings per share was up 34.6%. Copper pounds shipped second quarter over the first, it's up 8.8%, and the spread's up about 7.5%. Take what you will from those trends. It continues to be, you know, taking what the market gives you and adapting and pivoting and do what we need to do to continue to serve our customers.

Julio Romero (Senior Equity Research Analyst)

Great. Well, very nice job, and thanks very much for taking the questions.

Bret Eckert (CFO)

Thank you, Julio.

Operator (participant)

Thank you. Once again, for any questions, press zero one on your touchtone phone. Our next question comes from Ryan Patel, Private Investor. Please go ahead.

Ryan Patel (Private Investor)

Hey, guys. How are you doing this morning?

Bret Eckert (CFO)

We're good. How are you doing?

Ryan Patel (Private Investor)

Doing great. Just had a couple quick questions. The first one being related to the AR balance. I've seen you know, maybe just if you could just provide a little bit of color about the growing balance and about the accounts receivable turnover to help individual investor like me kind of understand that cycle, I guess.

Bret Eckert (CFO)

Yeah, it's a great question. I'll tell you, we ended June with about $605 million or so in accounts receivable. That balance remains 99.8% current. We had no write-offs during the quarter. Like our receivables typically turn, you know, it's in the low to mid-60s, but you know, all in, you're looking at about a 70 or so day turn. It ebbs and flows based on the receivable. You know, that balance every single quarter is poured out into cash and then you replace it with the next quarter sales. I'll tell you, all in, it is nothing within that to concern me. It's very consistent with what sales has been doing. It grew as sales grew in the quarter, but nothing to report there.

Ryan Patel (Private Investor)

No, that makes sense. You know, thanks for that clarification. The 60-day cycle definitely helps out. My next question is related to capital allocation. You guys have been doing a pretty healthy buyback, and at the current pace, you're likely to exhaust the existing plan that was put in actually fairly recently. What are your thoughts kind of on when that runs out? Is the plan to refresh it, or are you guys thinking more dividends?

Bret Eckert (CFO)

I'll tell you this, I mean, and I've said this consistently. Every single time we sit down with the board, and Daniel and I talk, you know, we go through what's the highest and best use of cash and that capital and cash allocation. The triggers we have are capital expenditures, and Daniel's been very clear, it's about either taking costs out of the system or improving our service levels, and we continue to execute on that plan. Stock buybacks has always been one, and we did announce the expanded stock buyback of up to 2 million shares through March of 2023. We bought back about 1.1 million under that authorization.

When we meet with the board again, we'll go through the same exercise and discussion and refresh again what is the highest and best use for that cash, and then act accordingly. You know, we look at it every time we meet. Daniel and I talk about it constantly, and we'll continue to evaluate it with those three triggers. The dividend being the lesser of the three, I still think the focus will be on the first two.

Ryan Patel (Private Investor)

Okay. Yeah. Thanks. My last question is related to just, I think I asked something similar to this last quarter, but, you know, you guys have a great story, and, it's probably one of the least known story for how great it is. Any plans to kinda get the story out there through, conference participation this year or any other means I got?

Bret Eckert (CFO)

Yeah, great question. You know, investor outreach continues to be very significant. We attend all the conferences we can. One of the things we're in the process of doing, which tees up well, and if folks didn't take notice, if you look at the bottom of the second page of the press release where we say, "Encore Wire" on the company's description, that was deliberately changed, and that wording is different than what it's historically been. We'll continue to push that out. We're getting ready to launch an updated investor deck that will be available this week. It gets a little bit more into the markets we talked about, data centers, renewables, what commercial, industrial, and residential looks like in today's world, about the infrastructure bill, the $450 billion infrastructure bill.

It talks about, you know, what's been driving some of our gross margin. Just from a supply standpoint, the tightness in supply and some of the outlook that you can look out towards from a copper perspective, where the fundamentals are just not aligned. You know, you got 3.5 days of copper above ground right now and a price that does not support it. You know, once things ease a little bit or a little bit of good news comes out of China, you could see that swing very quickly.

You know, what we are gonna try to make a conscious effort to really kind of change a little bit as to maybe understanding where our products are being utilized today compared to what they were utilized previously and how that fits into the hardening of the grid and the modernization and the decarbonization and the renewable world.

Ryan Patel (Private Investor)

Awesome. Awesome. Well, that's all music to my ears, so that's all the questions I have.

Bret Eckert (CFO)

Thank you for your investment, sir.

Ryan Patel (Private Investor)

Yeah, thank you.

Bret Eckert (CFO)

Mm.

Operator (participant)

Thank you. Our next question online comes from Mr. Bill Baldwin from Baldwin Anthony Securities. Please go ahead.

Bill Baldwin (Partner)

Yeah. Good morning and congratulations on continued outstanding execution.

Bret Eckert (CFO)

Thank you, Bill.

Bill Baldwin (Partner)

Couple of housekeeping items here. What percent of the revenues did come out of the residential market here in Q2?

Bret Eckert (CFO)

Q2 residential was right at 30%.

Bill Baldwin (Partner)

Okay.

Bret Eckert (CFO)

that compares to about 34% in the second quarter of last year. If you compare it-

Bill Baldwin (Partner)

Okay.

Bret Eckert (CFO)

Yeah. So 30% for the second quarter of 2022, 30.8% for the first quarter of 2022, so you can see a little bit. If you went all the way back to the second quarter of 2021, it was 34%. If you remember the second quarter of 2021 coming out of COVID, right? That's when residential was meteoric, right?

Bill Baldwin (Partner)

Right.

Bret Eckert (CFO)

It was a lot of pent-up demand, and then it went from meteoric to just really, really hot and kind of.

Bill Baldwin (Partner)

Right.

Bret Eckert (CFO)

Great question, though.

Bill Baldwin (Partner)

Right. Where are you seeing the primary tightness in your raw materials? What specific raw materials continue to be tight, and do you expect that to continue through the rest of the year?

Bret Eckert (CFO)

Yeah. I think it's the world we're in today, Bill. I do see it continuing. You know, the players change, right? One gets a little easier and three more get tighter, and then those two of those three start to get a little better and four others pop their head up. The metal remains very, very tight, and that's not changing. It continues to be challenged from that standpoint. Our long-term relationship with our partners, they've been phenomenal. They continue to perform day in and day out, and that's a huge differentiator because we can't deliver finished goods without raw materials. You know, just about every raw material we need, from the biggest to the smallest, there's still some level of tightness or challenges, right? As I say, those ebb and flow.

You know, I think that's the world we're in today. You still can't buy a car, still can't buy a boat. We're still waiting for windows and doors, and it's just kind of become the norm. I think this tightness is here to stay for some time.

Bill Baldwin (Partner)

Okay. What trends are you seeing in freight availability and freight rates for your truckloads?

Bret Eckert (CFO)

Yeah. It's gotten a little bit better, okay? It's still higher than what we've seen historically, but we've been able to mitigate a little bit. Our third-party trucking broker has done a phenomenal job of navigating that market, starting to pull in, you know, those reductions. Again, it's still higher than what we've experienced historically, but it's getting a lot better and we're getting realigned with the providers and truckers that we'd like to be aligned with.

Bill Baldwin (Partner)

Very good. Lastly, as you get more into large project work, things of that nature on the non-res side, and perhaps with other drivers also, are you where you wanna be with your distributor situation in all geographic markets, or is there opportunities to either upgrade or add distributors to broaden out your market reach, either geographically or customer-wise?

Daniel L. Jones (Chairman, President, and CEO)

Bill, this is Daniel. We have really good distribution in all markets. Currently, there's one or two that we'll be taking on going forward, but for the most part, we're in a good spot, really good spot. The difficulty from a sales perspective, a lot of times is taking on some in maybe too fast. As we've discussed pretty openly, as we continue to ramp up this CapEx and our service level and lower cost approach, you know, we'll continue as the market evolves to upgrade. As you know, I'm also pretty consistent and committed to getting paid on time.

We watch that pretty closely and you know, that's a testament to the quality of our distributor network that we have in place and our sales reps in the field, knowing which projects to go after. I mean, they're doing a fantastic job. As Bret indicated, for our receivables to be where they are and to be basically 100% current, it tells you the quality of the distributor and the sales rep that we've got out there.

Bill Baldwin (Partner)

Well, no question. Execution has been fantastic across a broad spectrum, obviously of all your facets of your business. Congratulations.

Bret Eckert (CFO)

Thank you, Bill.

Thanks, Bill.

Operator (participant)

Thank you. Again, for any questions, that's zero, then one on your touchtone phone. I'm showing we have no questions in queue.

Daniel L. Jones (Chairman, President, and CEO)

All right, Richard. Well, thank you very much for participation in the questions today, and we look forward to the third quarter call. Appreciate it.

Operator (participant)

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.