Atkore Inc. (ATKR) Earnings Call Transcript & Summary

We have -- we're joined today by Atkore's President and CEO, Bill Waltz, and the CFO, David Johnson; Bill joined Atkore in 2013 and served as the President of Plastic Pipe and conduit, and President of Conduit and Fittings before he's appointed the company's CEO in October of '18. And David joined Atkore in August '18 after spending 24 years at Eaton, where he was most recently the VP of Finance and Operations for the electrical sector. So as I walk over here, Bill and David, let me just ask you if you could sort of talk about Atkore for 2 minutes. For those in the audience who don't know the company that well. Maybe competitive strengths end markets, goals for long term, just a brief intro.

Yes, Yes, I'll try to keep it to your point, 2 minutes, Andy here. So Atkore, a several billion-dollar revenue company that's on electrical products is the main focus but also then a safety and infrastructure. So electrical product is probably self-evident, but literally all the cables, wires, conduits for any type of infrastructure across all segments of the market and so forth. And then safety and infrastructure, think about security and solar and things like that. So kind of a purpose. I think of it as how we literally power and protect the world. So exciting there. And then real brief on the value add, there's so many. But the one big thing is we literally are focused on being our customers' first choice and that we have like for electrical products, the full breadth of products in our segments, so we can do things like 1 order, 1 delivery, 1 invoice. And you're seeing that even pre-COVID. I know you're going to have a lot, I assume questions going forward on Atkore and projections. But we were a company that was growing 10% compounded growth plus in EBITDA even before COVID because of our business system, our employees and our value-add to customers.

So Bill, let me -- you mentioned electrification. And so the electrification of buildings and infrastructure, as you know, has really accelerated over the last couple of years. So maybe give us some more color to what you've seen and how that could help the company moving forward?

Yes. It's -- there's so many secular trends going on right now. So even pre-COVID, the focus on automating warehouses and data centers is, obviously, a trend that's been around forever. I think it's accelerated, for example, all the things that children being home school and so forth in virtual and needing Internet lines and so forth. Then you add secular trends like solar in there, more than just solar products, but that means grids would need 2 sets of lines going into them, the whole expansion of 5G, the infrastructure bills. And then finally, just hardening the infrastructure itself. In other words, you look at states like California, they're putting other electrical lines underground. Louisiana Florida, same thing, just avoid when a hurricane hits our citizens are without power. There's just so many different trends, and I probably missed 2 or 3, that if anyone in my mind, looks at construction trends for like square footage nonresidential, you have to add a couple of points on top for all the extra electrical needs going on right now. So it's an exciting time to be in Atkore's position.

That's great, Bill. So like, as you know, a lot of cross clients out there, supply chain, Omicron. Maybe you could talk about what you see out there in terms of the supply chain headwinds how they affect Atkore. Maybe talk about -- because your exposure is significant to non-res markets in the U.S., res markets in the U.S. What are your customers are saying around higher interest rates? Any sort of view that you have on it.

Yes. So a couple of different things I do sequentially. So obviously, as COVID Omicron seems to be going less impactful. I think that will help free up the end market some because if you were to look out there, there's companies like one called ABC, American Building Contractors. They actually have like 8 months of backlog, the same as pre-COVID. So the demand is out there, a little on the secular trends. It's just getting the supply chain to work. We're performing well, but at the end, state needing those products. As for interest rates, I would let the investors look and say, what does that mean for the end markets because there's probably some proportionality to us. But when I look at the forecasters being ABI, Dodge, Architectural Index and stuff like that, they're all positive. I mean, ABI just came out here yesterday, I think, with another forecast up or the Architectural Index and so forth. So everything there points to a very positive thing for the next couple of years. And as I mentioned earlier, that doesn't take into the fact that I think we can both grow faster in the market and then the need for electrical products with all the secular trends will add more than what anybody forecasting just from a square footage standpoint. So it's a good place to be.

I just wanted to focus a little bit because Q1 volume is still impacting you. So what do you need to see? Or what do your customers need to see to have volumes start to improve here?

I think the end markets are still there. I think it's just a logistical thing where we've supplied really well. But if you need to finish the building before you move on to the next building or Omicron's hitting. So I think as we go forward, we're still projecting low single digits growth and the mid-single digits for the year, which obviously means the second half of the year a lot stronger than what the first half. Everything we're seeing is -- obviously, COVID seems to be going down right now. It also does help some, especially in our safety and infrastructure business as steel costs have dropped from approximately $2,000 to $1,000, at the time, where that helps is some large manufacturer like solar that is sensitive to the overall costs are now at the point that they're going to project to ramp up and then both ramp up, in general, and then ramp up with U.S. manufacturers like us versus bringing in dirty steel from China and so forth.

Have you seen any projects move a little bit more because Omicron came down in February [indiscernible]?

Yes. You're starting to see the demand, again, without getting into the quarters and stuff like that. But yes, I do think job sites, employees, just like us, they go in the heat of COVID, you had 2% of your employees out every week as seen with COVID, you had another 2% out because they were exposed to COVID. So those type of things, I think, are starting to move. And then what we'll also see is we do have a little bit of seasonality into our business, so you can't be putting electrical cables underground north where it's still frozen. So as that opens up, I'm pretty optimistic for Atkore.

I should ask you, just while we're on this topic around international in the sense that you're mostly U.S. Do you have some international business, any geopolitical exposure that you have?

Yes. So we have around 10% of our business that is outside the U.S. We have a phenomenal team. I think we made -- I'm going to call it a shout-out to our international team at the last earnings call, consider just doing everything really well. Specifically -- and I'll move back. I'm not -- if it's to be de minimis to talk at all about Ukraine and an impact for us. I mean, honestly, from a world citizen view, it's concerning but nothing for us and an impact. And then our team internationally is just performing on all cylinders. So I could see us going forward with more acquisitions there because they digested the couple they've done and they're working well with end customers, demands there. So just like in the states we're investing. Have to wait for the future.

So Bill, I'm sure you've never gotten a price versus cost question before, but I'll ask you one.

Yes.

So you're one of the few companies that I cover where margins have kind of gone straight off, and as price versus cost has been an issue for everybody else. So maybe talk about sort of why that's been that way for you. Competitive advantages, we'll get into sort of longer-term guides that we both know, but like what has led to this?

Yes. So a phenomenal question because I'm going to start with, let's go pre-COVID to go if you look back, as I think I mentioned, we've grown EBITDA 10% compounded for like the last 5 years pre-COVID. So this is not a new phenomenon. And if anyone looks at the bridges we provided, price versus cost has always been an adding contributor. And that's because of the things we've done to make it easier to do business with customers, having the full suite of products that 1 order, 1 delivery, 1 invoice and there's so much opportunity going forward, that the customers are willing to pay more for the package to service the deliveries same as you or I that will go out to 1 popular website order products, and we're not cross checking 3 times over. Then you put COVID in there, where that ability to have confidence in a supplier like Atkore where we price every order real time, just accelerated that opportunity. So we -- and our customers have loved us. I mean we've got more awards, whether it's electrical distributor's organization, whether it's on the buying group that buys from us as a group, whether it's our sales agents in the last 2 years, all 3 of those have picked one manufacturer across the whole suite of the $100 billion industry has been Atkore. So again, we're doing something right in addition to, obviously, servicing our shareholders.

So Bill, I'd be remiss if I didn't ask you. You've been at the company longer than you've been CEO. But when you became CEO, it seemed like the execution level actually did go up and maybe even around pricing. Maybe talk about the changes that you've made over the last few years.

Yes. So I think it's just the right people at the right time, massive respect for the previous administration, which I was part of. But I think that laid the infrastructure of the Atkore business system. And then my whole mantra with the team has been more around how we focus more on growth externally after you've built the core foundation. So it is that pricing excellence, it's how you add value to the customer. And if the customer is getting the value, like I mentioned, they're willing to literally give you awards, switch business over and pay a premium because at the end, it's saving them the distributor money. The last thing a contractor needs is to have a whole union crew out working on something being held up because of our products that are like 1% or 2% of the cost of mobility. So we do the right things with focus on making our customers' first choice. That's our mission statement, and I think we can easily double the business, so growth [ and ] strong.

And maybe I'll focus on productivity as well, like -- it seems like you've really pushed the productivity envelope. We used to have that sort of $15 million marker. Where is that helping you out these days?

It's absolutely helping. It's where -- it's kind of like an exponential factor like the flywheel effect on it. If anyone was to look like I know mostly like my proxy peers, but for a typical $3 billion company in this industry, they may have 8,000 or 12,000 employees. We have more around 4,000. So we've automated our lines. So even there where you have people out with COVID or the great resignation. We're being impacted like any other company, but with more automation, putting in a more sophisticated blending systems, putting in more bundling systems. So just taking out the chance for safety risk and making it more efficient for our customers and our shareholders, we're investing the excess free cash flow. And I think there's still lots of opportunities. We're still -- while we're based off like a Toyota, Danaher business system model, we're still in the second or third inning. So much of productivity and so many things we can still do for the customers.

Just out of curiosity of those, another way to think about sort of like when electrical was in the 20s in terms of margin versus 40 today, like -- is there any way to think about what the cost basis is done? And to your point on productivity, is it down 10% or 20%, like any way to think about that, just out of curiosity?

Yes. I don't know. David, is it...

I don't know either. I mean, I would think that -- one thing I would say, obviously, in the last year, productivity is a little bit difficult, so to say because you have so much churn going on in your facilities with labor just getting in commodities and all that sort of thing. I would say gradually slightly favorable. Yes. I don't think, and over this period of time, it's been as significant as it was in the past. But I also think that, that's a great way to look at for the future. I think there's even more opportunities than in the future.

Yes, to David's point on knowing the precise number dollar percent is what we focused on is service and supply because if we do that, even like steel deliveries went out to 12 weeks, which typically would have been 2, makes forecasting [ hurt ], but we're changing over the mills. The last thing I need to drive is 20 basis points of productivity and frustrate a customer that's willing to pay 10% more, so. Serve the customer, do the right things. And as you're seeing in our numbers, it's paying off. They had that growth, external focus with the Atkore business system.

Yes. So let me ask you about PVC because, again, I'm sure you've never had a PVC question. So when you think about PVC miners, you've talked about them growing, in general. And so maybe can you give us a view of how the market has grown versus pre-pandemic levels? And you talked about this California bearing lines project, for example. Like we all think of PVC is just residential. How much is PVC sort of going out into these other markets?

Yes, it's across. So I actually think most PVC is still nonresidential, but of all, our market is slightly more residential [ goes against ] sub development. So if I had to estimate, I would say pre-COVID to the end of last year, 2021, probably up around high single digits to 10%. So that is -- the markets are in good position here. And the biggest thing even holding backpack is, again, the end market labor of getting people to work on projects. But as you mentioned, like utilities like PG&E in California, have committed to put all their lines underground. I was at a presentation recently with a center from Louisiana talking about how he was aspiring to do the same thing. So when a hurricane hits, there's other states like Florida doing that. Then you add 5G and the infrastructure, though, and there are just so many opportunities here for that market.

So Bill, I know you sell to the channel basically. So -- but how do it work for you? Like you're talking about -- you just went to Louisiana. Like do you see a proliferation of these projects in talking to your customers? And how might that sort of arrest if PVC were to go down a little bit on the residential?

Yes. So I think there's enough future opportunities to offset if residential goes down. One of my general managers is out with the public utility here recently, and they were even commenting to go. They still haven't spent the stimulus money when President Donald Trump was in office, let alone the [ all the ] multiple trillions, billions that the current administration has started and so forth. So I think when you look at all those opportunities, as I mentioned, from electrification, the digitization, the hardening of the infrastructure. And then you add a new -- just think about like solar, which obviously we're all looking to grow, that means like 2 sets of electric lines. You have to have it coming from the old utility and then you have to have it coming from the solar panel. So again, even those type of things, it's a good time.

So it reminds me to ask you, Bill, because I get this question a lot with you guys is that, okay, so it's a good time, right? Why are you doing so much better than others?

I think it's just that focus on still getting out and talking to the customers, 1 nice electrical industry is compared to what any consumer sees with -- I placed an order on a certain website and it shows up the next morning at my door. This is still an industry where large distributors place orders, they faxed it to a sales agent that faxes it to us. and we enter it or our competitors do, and you deliver even without the backlogs in 10 days. And so as we can sit here and make it simpler. We're the only one with this breadth of products, and we're a market leader and we show in our earnings report, all these things put together and literally aspire to deliver in 1, 2 days. People are willing to pay in companies like high single-digit 10% higher. So it's a great place to be with Atkore because we are taking some of the free cash flow. We're investing in capital. We're investing more than ever. David and I were talking with some shareholders early. There's almost any project from marketing to digital efforts that we're not saying go to. So as we give guidance around midpoint of $900 million, there's a lot more investment going on to truly make us successful in 2030. It's not just about 2024 and 2025.

Is that the special sauce though to your advantages, just breadth of product and high market share in what you're in -- offer...

Yes. I think it's those types of things that are making you see new business. Now you look and go, well, hold the house sustainable. It's proven even pre-COVID. Again, I keep going back as reference points [ ago ]. Anybody can say what I'm saying on stage but going, hey, who had delivered 10% plus a year? Who has won every award? I'm not going to call out other corporations, but obviously, we're in a space, not with our exact product lines but with global multibillion-dollar corporations. And at the end of the day, when the distributors, the buying groups, the sales agents are all coming back and saying, Atkore, you seem to have a secret sauce of continuing to acquire companies but making it easy to do business like the $40 million privately owned company to that reactiveness and the ability to bundle 1 job. Instead of quoting 7 products, we'll give 1 quote for the whole $1 million, $2 million. There's a lot of value-add there with our business system and the people we have engagement alignment that's working well. And I expect to continue to do.

Just out of curiosity, is your asset digitized quote that you've given is...

Yes. No, we have it with Salesforce.com, and that comes directly in [ encoded ]. And that -- so again, where you put metrics, and know we're responding in 2 hours or less to every quote. And then if we can deliver in 2 days to anybody, there is a huge quantum leap in what we can -- what we performed, but truly what we can do going forward.

So a little bit more on the competitive slate. You mentioned, I think, on the earnings call that competitor backlogs are down to 4 to 6 weeks versus 12. Do you continue to see competitors backlogs normalize here over the last month? And is there a time frame that you think they could actually get back to normal.

Yes. Don't know -- so the following thoughts. If I was to estimate today, I still think they're probably around that 4, 6 weeks. It varies by each competitor in each region and so forth. But the good news for us, we stated in our earnings call where we've given the guidance of $875 million to $925 million, there's a pathway to $1 billion is we've actually seen competitors go out with price increases. So obviously, we typically lead the market, but there's other people out there thinking about their value and the ability to actually increase this versus decrease. So good position there. And the other thing I want to make sure I clarify is, David and I have talked about, we don't want irrational exuberance. So we don't want somebody taking $1 billion and stepping up from $1.1 billion to $1.2 billion or something without realizing there could be some risk. But we put the $600 million out of EBITDA more is -- I'm going to say, a floor as we've articulated. We may never drop to that level whereas we keep doing M&A, new product development, investments and make it easier with digital.

I guess, Bill, it leads to an easy question. What would the conditions need to be to go to $600 million?

Yes. I think -- first, I think that would probably be several years out. And I think it would have to be a pretty dramatic decrease in this demand of products. In other words, square footage would have to be down mid-high single digits at least because, again, whatever square footage is, which we have a proportional correlation is all the things we already spoke about of how our need for our products. In other words, how many lines are electrical in a warehouse and an automated facility versus an old one? How much infrastructure is going on? That has not even really hit yet the U.S. market and manufacturers. So it would have to be a pretty significant decrease to make that happen.

Got it. And then you guys, just out of curiosity, have you guys estimated how much when the winter storm hit last year and messed up your competitors more than you. Do you guys estimate how much extra earnings that gave you? Is there any way to think about that? Or...

It's hard to think about because, obviously, one could sit here and go pre-COVID. We were at 3.27% and dropped last year $898 million. Obviously, some of that is our ability to take share, but it's also just the ability to move the market with that value equation again. So that was definitely an accelerator where customers absolutely wanted the confidence of Atkore versus somebody promising 6 weeks and delivering in 13 weeks. But it's hard to put a direct number to it.

I agree.

Okay. So we do have a couple of questions from the audience, so I'll read them. The first one is expectations for PVC resin costs.

Yes. So it's an interesting thing. I would say it's flat to slightly down with the following thought process. There's 4 resin manufacturers. They're actually asking or putting through price increases of 3%, 4%. On the same hand, there's some -- there's obviously market forecasters out there. They're actually expecting it to go down some. So I would at least say flat. One thing I want to emphasize that I think we've proven over the last 6 years of being public, there's very little correlation from our cost to what we do with market pricing. So like back when we first went public, people are trying to understand, like, while if costs go down, do our margins go down or costs go up and our profit. It's all about, in our mind -- in my mind, what we do to bring to your earlier question is that 1 order, 1 delivery, 1 invoice, that's the ability to supply faster. That's what's going to control, not what an input cost is.

Got it. And then the second question is difference between residential and nonresidential margins. Any difference?

No difference. Our products are agnostic. So in other words, if I'm selling -- I say, I at Atkore, 4-inch PVC, schedule 40, and we're charging $800 for 100-foot [indiscernible] or something, it's going to the same place. Maybe if it's a very large project or a utility, it could be slightly different, but basically no difference for any of our products.

I wanted to ask you, just -- you mentioned international for not a large part of the business but they're really killing it, right? So why are they doing so well? And are the market conditions different at all for them?

I think it's more on our own control. And [ as I'd say ], I'll give a shout out to the President of Carl Jones over there. We had a great team. And again, we've invested. We've added other people. They're working closely without calling out specific customers with data centers and stuff like that, that lets me sit up here and be very bullish on the future because I know what they have lined up and where they're looking to execute with that customer intimacy. Again, it gets back to how you become growth focused and external focused. But they're just hitting across the board. They're driving productivity. At the same time, they're driving innovation. At the same time, they're looking out for customer wins that are 5 years out. So -- it's just -- it's the right time. We did 2 or 3 acquisitions probably 3, 4 years ago. They've assimilated those acquisitions. They got the synergies. So again, with our free cash flow, it's for Karl and his team, how can we do that again? So we'll tend to invest both organically and inorganically.

So I want to ask you about the impacts of the infrastructure bill, but let me ask it to you in this context like as you expect volume growth to come back as you go into the year, where is the volume growth coming from in the portfolio? What sort of verticals is it coming from now?

Yes. It's -- well, almost I would tell you, I'll walk through, Andy, your question. But it almost as somebody looked at like Dodge, for example, as a forecast. I think other than like amusement parks, which is like 2%, 1% of the market, everything is up. So -- but literally, it's the secular trends like data centers are still exploring hospitals and just the infrastructure. We've been to 2 acquisitions recently to position us for the future, where, again, we have this full suite of products, but like fiberglass conduit and then conduit made out with different res material for HDPE. And like that's perfect for bridges and tunnels and underground with 5G networks. So it's literally almost everything we expect to go up.

And I'll just add, like if you look at Dodge starts and some of the biggest starts that's happened in the last couple of months have been airport renovation of expansions or what have you in New York, Pittsburgh and [indiscernible]. That's business I'll be there for years. Those things take a lot of time. So there's pretty broad-based, I think, opportunities across our end markets.

Nice. And so the government's kind of messy right now with the continuing resolution. But as we get past that, how do we think about like as the infrastructure bill sort of digesting here, like have you talked to anybody to get a little clear picture of where the best opportunities for you guys are?

Yes. I think for that, probably the big -- first, there's so many, but I do think it's around data and electrical infrastructure underground, like you used it. We talked about things like California and Florida, but putting all those lines into 5G networks and so forth. And that's where the reasons we specifically got into this other new type of conduit, I think new for us called HDPE. How with customers -- where we talk about PVC with 4 to 6 weeks, we -- our personal backlog in that product line is like -- more like 4 months. It's like there's so much -- and again, talking to utilities, they're not sure that they can find manufacturers that can keep up. So it's a good position to be in.

So you mentioned acquisitions, something that you guys do well and a lot of actually. So maybe talk about sort of -- I think you mentioned last call, you have 100 potential targets you might focus more on international a little bit. Like so where is your sort of appetite for acquisitions these days? It's, obviously, a lot more volatile market right now. Does that impact the frequency of acquisitions?

Yes. So a great set of questions there. I'll do 2 things. I don't -- the fluidity margins up, I don't think impact us because we're, I think, rational leaders that were not looking to say, well, here is this 1-year peak and how do we model versus what stable type of profits and classic discounted cash flow and so forth. For us, there are still a lot of opportunities out there. We, I think, have a sweet spot like the HDPE and the fiberglass conduit acquisitions to buy things that both either expand our geographical footprint or add another product line into that basket as we become that, again, 1 invoice delivery and invoice and orders, sorry. And with it, there's a lot of companies that we can buy. I'm throwing out a number like 6 multiples. We bought companies for a lot less than that. Maybe there's some we bought for an 8 multiple. But it's really effective things because, again, if you're buying a company with like $10 million, $15 million privately owned, there's not a banker involved. It's not an auction. They're looking for the reputation of Atkore that they're looking. We are to invest and grow, keep their brand and literally take it national. So for them, first generation, second, third generation, it's not -- yes, they want to be paid appropriately. But it's not just about the price of the deal that a private equity seller or a large strategic would be selling. It's about what are we going to do for the employees. So it's been really accretive for us. And then obviously, I think with our business system, and our capabilities. We immersed the teams well. They feel part of the Atkore family. And then we make it easily -- I say easily, but it depends on what acquisition a turn of synergies. So we're doubling down. We've literally doubled the size of our department and even shifted some of our general management focus go, guys, you need to go find and drive more deals. So we did 2 right at the end of the calendar year, and I would hope and expect to be able to announce more here as we go forward in the next couple of months.

And Bill, as you get larger, maybe there's a bigger appetite to do larger deals. So -- are you -- should we expect larger deals out of the...

I think that the prism is opened up, so to say expect -- I would say yes to that. But definitely, the Prism we opened up again when we're generating and I'm swinging a number, but $500 million of free cash flow in our net debt ratio is almost 0. We have the capability to go after bigger deals. And I think, again, as long as they -- are strategic and synergistic and so forth, with the [ merit ] management bandwidth, which I guarantee you, we have that, yes, we'll open up the prism.

I should ask you, I mean, it's a balancing act with share repurchases, too, right, because you've already spent I think I have here you spent $175 million already this year. I think your target is greater than $200 million. So it's quite a bit.

Yes. So let me explain that. I think with what we -- so share buyback to your point, has been large so far. In our mind, again, any of our free cash flow, there's not a bad shareholder customer thing to go organically, we're getting a 2- or 3-year return on investments there. The acquisitions we talked about on the same hand, and I don't have a precise number, but if someone looks out a year, wise like future earnings of even $600 million, which I think we're not giving guidance, we'll exceed for next year. Again, we're not at the point of giving guidance for that. We're trading at a discount, my opinion. So therefore, we're buying back shares. And as we've given -- the Board had approved $400 million in 2 years, there was nothing in that $400 million in 2 years, I said we couldn't accelerate all $400 million that you go, hey, 4 months into the calendar year -- or fiscal year, we've spent $175 million. One could extrapolate that we may be asking the Board for more money well before those 2 years, so.

Interesting stuff. So I might be going backwards, but let me ask you about organic investment in the context of you're spending $90 million on CapEx versus usually $20 million to $30 million. So what are you spending it on? And what can that do for Atkore? And I should ask you about sort of focused in products because you have a sort of good new products program, too. So I think I'd divide that in probably 3 areas for that. And it probably is almost equally -- of the $80 million to $90 million.

So first is organic growth to go, whether it's -- I mentioned the acquisition of HDPE to go, hey, if there's space in our facilities to add more lines there. It's a booming market, solar, for example, as steel price drop and electric solar manufacturers want more U.S. manufactured product and clean steel and so forth. That's a huge opportunity. So we're definitely investing in capabilities, more capacity for us appropriately in new product development. So that's a huge part of it. You referenced and I would just put a plug out there for our teams. We're coming out with a lot of new innovative products that are patented labor savings, innovative, winning awards, and they give a dozen awards across the industry in Atkore. Again, when you -- 1 or 2 a year across the full suite of all the large global corporations. We're doing something right. And that creates pull-through to a contractor coming into a distributor saying, "I want the Atkore product. If you're not stocking it quickly, the contractor is walking down the street to the other competitor distributor. So that just forces pull-through. And then the last thing, back to is ease-it-on business is digital opportunities. Again, this is an industry where I mentioned the kind of embarrassment we saw in the past. It's still an industry that uses a back machine to communicate the types. So as we do things like API, so our distributor website, simultaneously, at any moment, so exactly what inventory we have in stock and we make up apps for our distributors. So as they pull up to our warehouse, they know just like you or I going into convenience of a store and go pull up and install 3 and the person brings your product out. We're doing the exact same thing. So and then investing like in revit and BIM models or contractors can design around Atkore. So there's so many opportunities, it's such a rich target. And we're taking advantage of this opportunity because, again, I want to emphasize it's all about 20, 30. I'm saying that it's thinking out a decade. It's -- we're so far past. David, I and the executive team are not focused on the quarter. That's like if we have to get involved there, then I need to look at the management team. But it's not. We have a great team. It's great secular trends going on right now.

And Bill, with all that being said, is it logical to think you'd spend more CapEx than over time but you wouldn't get back down to that 20?

I don't think so. No. At least not for the foreseeable couple of years or so.

So we still have these opportunities, Andy, in the 2- to 3-year payback. I think it's certainly a really good -- for us, really, the counter to that is probably just our ability to execute those capital programs. And then even now, we're definitely having to look at 2023 and beyond capital because supply chains and what have you. In the old days, we used to get something for 6 months. Now it's a year plus. So we're thinking of it far ahead.

David, I think it's a good sort of segue into just asking about inventory and working capital, in general, start out with big -- pretty big headwind on the supply chain side in Q1. So the journey -- you guys are really historically good at conversion, 100% plus this year. I think you can do it.

I think this year is going to still be one of those years where we're below the 100% and for a couple of different reasons. One, receivables are up mainly because of our pricing excellence. And so I think everything's current and good. It just happens, it'd be our pricing [ loan ] through there. And then in inventory right now, we would like to get to a point where our service levels and our backlog is back down to, I'd say, reasonable levels, which will probably be maybe the end of this fiscal year. So I think we're still going to be in that slightly lower than 100% this year. But I would expect in FY '23 and beyond, we'll get back to that number, if not exceeded a little bit.

So we have another audience question here. So country breakdown for the international market, do you expect volume growth to be higher than U.S. long term?

I don't -- nothing precise.

No, no, I would say we're mostly in Western Europe, U.K., Germany, Netherlands, that sort of thing. And then we also have some business in Australia and New Zealand. We also support growth in like if the Middle East happens to have a large soccer stadium or something like that. We'll support that out of our U.K. business. So I think those businesses have been doing pretty well. Where we're really winning, I think, as being really close to our customers with data centers, and they're investing quite a bit in the electrical vehicle infrastructure. And so we're able to work with those folks. And so I think that's where the growth is coming from.

Got it. And then let me ask you about sustainability. It's obviously a big topic. You guys have talked about it more. I think you recently said 4 external targets for ESG. Can you elaborate them -- on them and then talk about how you're adapting to sort of a greater focus?

Yes. So that's a phenomenal question. I think the one thing I'm so excited about Atkore, and I'll tie it in ESGs. I think we just naturally backed the values and doing the right stuff, like I mentioned, customers is we were driving ESG, I think, quicker and faster than investors and the different people have put out targets and so forth. So it's always been part of our DNA. And you see that as a plug again like Newsweek literally ranked us 48th in the nation for our ESG efforts. So I think -- I know we compare to our proxy peers and all that stuff, and we're in the top quartile when you look at ISS and Glass Lewis, all those type of rankings. So it's part of our DNA. We're going -- again, a lot of things when we're making this type of money to really look, for example, a year out or product life cycle to be able to tell exactly what the carbon footprint of each of our products are. So lots of leverage there. And then from several specific goals, we -- firm believer in diversity. So how do we increase like 600 basis points in our diversity over the next couple of years? I'll give you a couple of other goals in a second. But the other thing I'd love with Atkore is our goals are set for 2025. I hate to say, but it's really easy to commit to being carbon neutral in 2050 when none of us will be up here on stage versus we specifically said, let's pick goals 3 years out, drive the diversity like that, cut our carbon emissions by 10%. So again, as we're driving different things, and we've won several Energy Star Awards from the EPA in recognition of that. So it's driving things around those goals, very short -- I say short term, but 3 years out, so it's measurable, it's specific. And again, it's just the right things to do, let alone, I'm glad to see investors start to focus more on it.

So we always focus a lot on the electrical business in terms of margins, all that kind of stuff. Safety and infrastructure, sort of mid-teens. It's been mid-teens. How do we think about that trajectory going forward? I think the mid-teens is probably the appropriate. So I'd just say here's a pathway to 20% or something. I probably won't go there. But what I would tell you is to go the whole thing of solar industry, the whole thing of security to go, hey, how much more is -- forget the current situation with Russia, but just people wanting to fill secure with bottlers in different product lines like that, that I think there are some secular [ trade wins ] around that area that's going to help us as we go forward. So I would expect, again, to be a market that can grow at least several percentage points, if not more, faster than GDP. I mean, obviously, solar is supposed to...

And also in that business, Andy, is our [ Union ] metal framing business, which when you're looking at a data center, there's a tremendous amount of content around that. So that piece of that business is doing really well.

And you've mentioned solar a few times and just -- we only have a minute left. So maybe -- are you seeing solar projects sort of move again [indiscernible]?

Especially, I think we're forecasting strong for the second half and forward. When steel jumped to $200 -- or $2,000, excuse me, that was not a global phenomenon, like the cost of steel in China was a lot cheaper. But now this steel has dropped like hot-rolled steel to closer to $1,000 and the backlog going forward is really a question, can we keep, which is a nice problem to have.

I think we're almost out of time. So we very much appreciate your time.

Thank you. It's a great conference. I appreciate all the questions.

Appreciate it. Thank you.

Thanks.