Gibraltar Industries, Inc. (ROCK) Earnings Call Transcript & Summary

Good afternoon, everyone. Thanks for taking the time. We're going to kick things off here again. So I think we are live online again here. So with that said, we're joined with the Gibraltar team here. Do you guys -- I mean look, in terms of kicking this off, obviously, it's a great platform here to have you guys online in the room. Do you want to make any opening comments or remarks? I know we have chatted here of late, but there's probably a number of different things coming out of the third quarter. There's a lot of different commentary from across the industry in recent weeks that we could go over. I've certainly got a list of questions for you guys. But considering the wider audience here, do you have anything that you guys want to share at the outset here? And again, thank you, everyone, for taking the time.

I would suggest we just jump right in.

Let's do it. So here, how about this? I'm going to frame it this way. In totality, third quarter was a bit choppy, right, for the whole space, right? And in terms of looking at the tracker space and looking at just what's happened across solar delays, I'd love to get your perspective here on what are you seeing out there in terms of execution and ability to get projects done on a timely basis. So just visibility on the business, right? I think that's the core question that a lot of utility scale has been dealing with of late, and maybe that's just the right place to start here, if that makes sense.

Yes. No, it's a good question. So probably the most difficult thing we've had is trying to understand exactly when the revenue would flow. So it's not the contracts being signed. It's not the backlog, and our backlog only has in it signed contracts. It's not getting the deposits from customers. It's actually timing it up with when the revenue will start to flow in a given quarter. Historically, if you looked at projects in general, about 10% of those projects would float from one quarter to the next. That goes back, 10% since the beginning of the industry. This year, that really popped up to around 20%, 25%, which was the surprise. And you say, well, what's changed? And for our customers, the majority of the reasoning for that is around permitting. And I think that's a function of -- if you think about what we do, we have 400, 500 projects a year. We've got 250, 300 at any one time, always active. So we're in a lot of remote locations, and you're dealing with local government offices that you're trying to get permitting from, whether it's city or county or state or otherwise. And so it really comes down to one project at a time. And it felt like when the industry kind of stopped or slowed down significantly, you had a lot of projects that were still flowing into the ground, but a lot of that had been permitted and approved some time before. And there weren't a lot of new projects or near as many new projects being permitted upfront that would go into the ground now or later. So I do think it's been overwhelming for a lot of local communities to get that permitting up and running. These are also offices that work 5 days a week that probably are remote somewhat now. They're also permitting for every project in their community, not just solar. It's everything residential, everything commercial, and I do think that's been part of the challenge. And that's probably been our biggest frustration that our customers have had is just that. Now what I would tell you is what we've seen recently is that percentage has started to come back down a little bit. So that's good. It tells us that some of our projects at least are getting through the pipeline and hopefully, that will be more indicative of what you'll see going forward. But on a year-over-year basis going forward, if you know it's going to be 20%, then you plan on that, so you don't have the surprises. The difference this year for us was we never saw anything more than 10%. It spiked to 20% to 25%, and that translated itself into, hey, we saw revenue move from one quarter to the next. You shouldn't see that next year if you're basing off of 20% versus 10%. So that's been probably the biggest delay issue. It really hasn't been panels most recently. It really hasn't been interconnection most recently, and we haven't seen a lot of cancellations or customers holding back because of financing or anything of that nature. I know there's a lot of noise out there and I suspect a lot of that is out there, and it comes down to every individual project. So we've been fortunate so far where that's not been a big driver of the business.

Yes. Bill, maybe just to keep going with that in brief here. It sounds like you feel somewhat calm about some of the issues. I mean you're citing, hey, look, permitting issues are still real. And they're not going away. They're somewhat pervasive. It's endemic, right, maybe this is a better word to be using here. But it sounds like you feel relatively calm about those that have been identified and having a certain -- adjusting for a certain cadence to them. You want to talk a little bit more about how you think about the next couple of years and the visibility and kind of adjusting for and having a sense of confidence of what you have kind of visibility on in backlog and otherwise is going to materialize on schedule, or having handicapped and moved your schedules accordingly to adjust to that?

We think next year is going to be, I think, very solid. Our backlog supports that. It's been growing for the last couple of quarters and we anticipate that to continue as we feed into the year. Now our time line from the time we sign a contract to completing that project tends to be between 3 and 9 months. So the beauty of our business is we have a very short window where we can see from order to execution being done in a very short period of time. So our backlog, as it builds in a given year, it gives us really good insight that year plus the following year. And that's about as far out as we see, that's the C&I space. But in general, I would say our customers, despite all the nuances of -- and headwinds that we've all been dealing with, ultimately, it still comes back to, is your backlog growing or not. If it is, then your customers are going to plow through and continue to plow through. And again, our customers, there's no reason to issue a contract with us and give us a deposit unless you're going to move forward, right? There's no incentive to do that anymore. And you won't do that unless you have permits in place -- most likely have them in place and a panel in hand. And you didn't have to worry about that 2 or 3 years ago like you do now. So I think we feel very optimistic about '24 and plowing into 2025, and all indications are that as of today.

In fact, that's sort of the -- I just wanted to make light of a point you just made there about the cost of financing in this environment literally incentivizes folks to really give you real and valid projects. It almost disincentivizes anything that isn't real, not going to go from reaching into your backlog, if you will.

Yes, it's absolutely true. And that's one reason, guys, we never count anything in our backlog outside of a signed contract, never have, never will, because we've been in this space as a public company for 8 years. Anyone that's been around solar, you know the roller coaster that we've all dealt with. We made a decision day 1, nothing goes in our backlog unless it's a signed contract because that's real, and then nothing becomes real unless you're able to deal with the variables that are on top of you at that time. And that is important. It's true visibility is the way we look at it. And I think that makes sense as the way to run the business.

Yes, absolutely. Well, let's talk about this. Actually, in terms of having visibility on projects, I mean not all of your peers in the solar space use such a vigorous definition of what's in their "backlog," as you know. But with that said, I'm sort of curious if I can use the broader term of "pipeline," something that might be more tantamount to some others out there. How do you think about that evolution and that -- the longer-term visibility that's showing up, whether -- whatever term you want to -- term you might want to...

No, it's a good question. Everything that's not in a contract we put in our funnel and we gauge our funnel through 7 stages. It's not rocket science, but that funnel is as robust as it's ever been as well. And so one hand is getting those contracts. The second thing is that funnel. When you look inside the funnel, how much of that is your existing customers that are continuing to invest and drive more fields in place and so forth. That gives you an idea of how your customer base can deal with some of the variables that we're dealing with. And then there's the new customer base that you're trying to get as well and how long have they been in the space and what's their capability. So that's very robust. Our backlog grew 13% last quarter. So I think that points to some pretty solid outlook for us. I think the funnel will continue to grow and yes, I won't quote you a number on it because everyone else in the industry does that for us. So I'll just say it's very attractive.

Got it. How do you guys think about growth over the next couple of years? I know you guys have a few different metrics out there, I think, for '25. But do you want to talk about kind of the growth of the industry and how you guys are keeping up? Maybe might talk towards like market share maybe as well?

Yes. So we -- prior to UFLPA, DOC and all the other fun stuff, we were averaging between 18%, 19% per year for the previous 5 or 6 years. So pretty good track record organically growing the business. And really, the swim lane has been the C&I space, and we think there's a lot of runway still there. And I think the C&I space has grown depending on -- looking at industry published information a little bit faster actually than the total market. And I know that ebbs and flows in a given year, but over a period of 5 years, I think the U.S. market is pegged somewhere around 15%, 16%. And so I think C&I is a good space to be in. We are a leader in that space. When we acquired TerraSmart with our business RBI, we were the top 2 players in C&I, and our idea behind that was to own that space and to build a portfolio in that space. And if you think about that space versus utility, it's a little bit different, as you guys probably know better than I, but ultimately end of the day, we want to design for you on a piece of land, a return profile, and we're going to manufacture whatever it is you need. We don't actually sell what we make. We sell what gives you the best return. But what we make happens to be a combination of fixed tilt multiple tracker solutions, 2 different foundations, an eBOS solution and as a separate business, we have a canopy group. So if you're thinking about a piece of land, the combination of fixed tilt, tracker, eBOS, whatever foundation you want works for us. We don't -- and we give you a price. And ultimately at the end of the day, that's the selling pitch and that's worked pretty well for us. And then we're going to do the install. The install side, you might think that that's pretty basic. And in some ways, it can be. But when you get into C&I, particularly in some unique spaces, a lot of people may not understand we have built a business around autonomous vehicles and so forth that actually do the install, help us with the install. So our ability to do it correctly the right way the first time in very extreme conditions, whether it's lava in Hawaii or sand in the Caribbean or the side of a mountain, doesn't matter to us. We know how to do that quite well and we've done about 3,000 fields the last 5 years. So we've seen about anything you can see in the field. But that piece is where you can make a lot of money, but you can also have a problem if you don't do it right. But if we -- when we looked at the space, we said what do we need to manufacture? Well, first of all, what do we need to design and help our customers would determine what do we need to manufacture, what product portfolio and then what's our installation capability need to be? If you look at that entire spectrum, what you'll find is a revenue and a profit pool we felt that was pretty attractive for us to go participate in and be closer to the people that are actually writing the check. And for us, that's a business -- part of our business model we really like. We want to be held accountable, but we want to be right there with the person writing the check that's going to own or operate that field. And so that's the way we built our portfolio. The key for us, I think, going forward is our eBOS business continues to grow quite well. EBOS in the world of C&I doesn't exist from a manufacturing perspective. What exists is individual electricians pulling wires and making connections on site, which no one really likes. But if we're already on site with the labor doing the foundation, the post, the racking, it makes sense for us to do the eBOS at the same time, right? You'd think that would be pretty simple. And technically, it very much is. The issue is you've got to set up your building your business processes to deal with 500 projects a year, not 25. So that ripples all the way through project estimating, manufacturing and then field installation. We're figuring out how to crack that code so we can actually bring an eBOS solution into the C&I space, which has never been done before, which is great. In parallel to that, we continue to grow our utility-focused eBOS business as well. So there are some really interesting things, I think, for us that are unique. If we can just teach customers to buy both things from us because we've trained customers for 10, 15 years to not, but now there's a value proposition that's never existed before because we're the only ones in the world that actually have that. So it's up to us to do something with it, and we're working that pretty hard. So that gives us also a lot of confidence around how we're going to drive the business going forward.

Do you want to talk a little bit about the landscape and how that's changing? I know we chatted a few months ago about the various players, where they stand, your position within it. You talked about like, for instance, C&I you like that end market. It seems to be doing relatively well, right, at the end of day, speaking of which. But do you want to talk about the overall landscape? I figure let's pull back quickly, talk about the landscape. Where do you guys see yourselves, where you guys continue to see yourselves, right, if you want to like frame it out that way?

Yes. So C&I has been our swim lane, and people ask us all the time, do you do any utility? I think that depends how you define it. So our average project size is 8 to 10 megawatt. We're doing anything from 3 to 100 megawatts and everything in between. So you could argue, anything above 20-megawatt, we're in utility. Well, if that's the case, we've been in it for some time. That's becoming a bigger piece of what we do. The difference is, in a traditional utility project, and APC is going to actually do a lot of the install, our customers are asking us to take that on. So that's a value proposition you tend not to see in large projects that we're actually getting access to. And I think that's important to us. It's not ultimately a showstopper if we don't get it because really for us, utility is relatively easy. It's just material and shipping to site and you're done, and we can do that all day. That's not that big of a deal. The reason we haven't been doing it is because we were growing so quickly for 5 or 6 years, we couldn't keep up. So yes, our customers have been -- started out mainly as C&I, but you'll find a lot of our customers now are doing 20 megawatts, 30 megawatts, 50 megawatt, 100 megawatt. That's just them having a runway for themselves and pulling us along with them and us providing the same solution set. So that's how we'll get pulled into bigger projects. That's how it's actually happening. We're not necessarily looking to go bang heads on a 400-megawatt project for a cents per watt negotiation. We're going to go where we think we have value that we can get paid for appropriately and we'll do our job. I will tell you upfront, I'm more interested in profit share than I am market share. They're not independent of each other per se, but I think ultimately, at the end of the day, for us to grow the business, we've got to drive margins so we can invest accordingly. And so we're going to pick and choose where people value us. There's enough room to do that, and we'll make the investments we need to continue to expand into other segments where maybe we haven't been in the past. So I think the other way of -- for people trying to come our direction, it's a little bit different because, again, you've got to have a different set of business systems and processes to deal with a fragmented customer base with a lot of different locations that you have to go into and be successful, and you have to bring to the table an installation capability as well. And that's where I think a lot of the utility guys have tried to dip their toe in this. This is not new. I mean it's cycled through it over the last 10, 15 years. They've come in and come out because it's hard. It's hard because everything from estimating all the way through is now got to be not 25 projects a year, but 10 a week. That's a whole different DNA, and your business has to be capable of doing it. So that's why we stay in our space. And you'll see us creep up more into some of the bigger pieces as they present themselves.

Now look, I think in parallel, we've also discussed this in recent months, but I think it's worth hitting squarely. It's been a big debate, especially through third quarter, about like the margin potential of this business, right, and perhaps happen to be different views about this. How do you think about that, especially because as you said, you swim in a slightly different lane than some of the other, should we call it, bigger peers out there. But you guys deliver pretty healthy, and I don't think you talk about this is a necessarily low-margin business. Love to hear how you think about it.

Yes. So the last 2 quarters, we've had down sales while our bookings have gone up, but our margin profile has improved into double-digit range. And we said by 2025, we'll be at 15% operating income, about 17% EBITDA. We feel really good about that. I guess my point to everybody is, in the world of C&I, what it affords you is an opportunity to create more levers across your business to manage your margin accordingly. And if you don't identify those, then I think you're in trouble. If you depend on volume, then you probably should get out of the business. Volume helps. But when you think about the way we built the portfolio, there's a manufacturing and a supply chain aspect that has with it a cost structure and opportunity to always get better. You have the field installation has the same kind of thing. If you have the same discipline in that portion of your business, which is 40% of the revenue and profitability opportunity that you do in manufacturing, you can really do well in this space as well. So those are sets of levers that go into it, different aspects of our business. And if you layer that in with business mix, product mix, new products, you can see where the levers for profitability, particularly at the gross margin line, really start to show themselves as being potential opportunities. And that's ultimately what drives our SG&A. So the best thing that's happened to this industry is the 3 or 4 worst things that could have happened to this industry in the last 3 years, which is it forced us to question every paradigm about how we're doing business. And I don't say that lightly. I mean tearing it down and starting from scratch about how you're going to conduct business and the capabilities you have to have in place and your mentality about how you're going to price for the value you create and more importantly, what value are you truly creating. This industry has never had a headwind until 2020. Think about it. Benefits galore. The price of solar, the cost of solar went down over a 10-year period when we had huge duties on the most expensive panel. Never had a headwind in 10 years. And all of a sudden, overnight, inflation blows everybody up. Interest rates blows everybody up. UFLPA blows everybody up, DOC investigation blows everybody up, right? Anything else, anyone want to add anything? Interconnection, let's throw it in there, right? So look, we can all cry about it. But at the end of the day, you can also look back and go, "All right, well, what are we going to do different?". When I came into this business, I felt as if the leverage was such that everything rolled downhill. And if it was crappy up here, it was really crappy where we were. And that's the way contracts were lined up. That's the way risk was mitigated and so forth, and we needed to change that. And I think this has been helpful in that process to challenge paradigms. Those are tough conversations. Not every customer loves you when you have them. But at the end of the day, they do need us. We have to be around. And I think people do understand it and do think the stronger are going to get stronger, and those that don't take advantage of it won't. But I do think it's a healthy thing that the -- in hindsight going back over this, we'll look back and go it was a healthy thing that it happened. It's unfortunate because a lot of it's self-inflicted, but at the end of the day, it was probably necessary at some point.

Actually, Bill, to that point, what do you need to see to get to that '25 target, that 17% EBITDA margin. That's a nice place to be. What do you need to get done within the business, what kind of volume, SG&A? What are the different parameters, right? You talked about being in a healthier place today. What needs to happen?

So as I said earlier, we had 2 big chunks of levers, whether it's in the manufacturing supply chain or the field installation aspect of the business. And we've worked really hard on both. When inflation went through the roof, you saw some people get hurt pretty hard with contracts because where steel had moved, et cetera. We've been in around steel and aluminum for -- since 1973. We watch it daily. It's in our blood. We always have across all of Gibraltar, not just this business. So that was not actually our big exposure. Our big exposure was when panels couldn't show up when people thought, our field installation part of the business really was challenged. We were deploying crews everywhere and stuff wasn't showing up. And so we had a lot of extra cost and that really hurt us for a couple of quarters until we've kind of fixed that. And that's really important to note because if you look at the last couple of quarters where we're running 14%, 15% operating income, how do you do that if your sales were down 20% year-over-year? And a lot of that is because those levers across each of those 2 big buckets were really starting to pay off for us. So that's kind of some context as you think about volume coming back. I would say getting to the profit levels that we're expecting to get to in 2025 are very much achievable, and I'm even more confident today than I was a couple of years ago because of the work that's been done to get us there. On the volume side, I think we just -- we don't need any more surprises that's going to stymie our customers from being able to execute what they would like to do. And if they do that, we have the capacity and the ability to get there. It's just a matter of them, some of the handcuffs coming off of them so they can get going. And permitting is one of those and so on and so forth. But yes, we feel like it's still a pretty solid plan by 2025.

Right. And just to make sure I understood your [ term of art ] here, permitting, does that need to improve here? I mean -- or are you kind of -- you feel like you're in a pretty good place in terms of the -- because I understand that backlog doesn't necessarily stretch all the way out. You don't have perfect visibility to '25. But at least at the current "closed" rate or what have you to kind of capture the curtain cadence here through that filter, you feel pretty good about being within that line of sight of 17%. Is that the way to think about it? Or do you need to you need improvement on permitting?

No, we feel pretty good about our line of sight based on what we're demonstrating today, particularly in a down sales environment.

And so if I can pivot, I know we've talked about this a little bit in the past, eBOS, right? In fact, let me put it this way. There is a certain level of excitement across the space about adjacencies and trying to sort of strategically pivot with -- to take advantage of the totality of the solar build from companies like your own to sort of maximize the value proposition. How much of the solar install value can I capture, if that's the way to say it. How do you guys think about tackling that? I understand that you guys already are not trivially exposed. But as you think about kind of really leaning into this business and the business model and how you want to be involved in the space or the scope.

As we were speaking with the group earlier, the -- when we looked at this industry to start with, the first thing we always do is we have a rulebook we take ourselves through. It's kind of 50 metrics around the industry itself. And it has everything to do with structure and competition and customers and profitability and a whole host of other risks and things of that nature. Obviously, the risk part, we didn't see as clearly as we would have hoped, but -- relative to the last couple of years. But in general, it's a really good space. But part of the exercise is then map the entire profitability and revenue streams that come with the industry. So we designed our portfolio around getting at what we thought was the right chunk of opportunity to go after, where we thought we could differentiate ourselves and bring value that others could not to the same degree. And for us, that required us to do some things with our core business as well as acquire TerraSmart, which we did. And then when things hit, really back to my point of challenging paradigms and so forth, to get the basis to be more scalable. I think what we learned was what was and was not scalable at the time that we were going 7 days a week, and we've really addressed that the last couple of years. So I think about the profit pool that exists across what we do today is something that we still have a lot of runway with. I mentioned earlier, if you think about the eBOS type solution set that goes into C&I today, that's probably a $200-plus million market at a minimum that today is untapped. We're going to go crack that nut. We're the only ones that really have the opportunity to do that, in some respects. And the reason is because it's not the technology, it's the business systems that allow you to deal with smaller projects, 10 a week, and get out to install and leverage the crew that's already there, putting the foundations, the post and the racking in place. Nobody else has that. So that opportunity is there for us, and we want to own that. Clearly, we want to continue to grow in the utility as well with eBOS, but the next step is, if you think about the foundations, racking, tracker and eBOS, what that lends itself to is an O&M world that we may be in a much better position to go into than we would have a few years ago as well. And that's a space that I'm quite familiar with personally and spent a decade of my career in another industry, very similar, doing this. And we've got a number of people on board now that have been in this space as well. And so look to us to kind of think about that as another piece of the profit and revenue pool that we will approach down the road. But right now, the industry is not necessarily ready for that, and it will be.

When you say down the road, I don't mean to put words in your mouth too much, but '25 seems like this is a near-year focus. That's the near-term focus or medium-term focus. Down the road is after '25, to interpret that. I mean again, I get that you can set things up. You see line of sight of how you want to build the business. Is that fair?

Yes, I think it is. We have plenty of work to do between now and then, and getting into O&M, as an example, you could do that in a couple of different ways. But there's certain domain expertise you have to have in place, and you have to have a certain infrastructure to deliver that value proposition that needs to be put in place for that to be something that's scalable and you can make money doing it. The concept of O&M for what we're talking about is not rocket science. Again, it's not -- it's actually more of a commercial issue than it is a technical issue. But there are some building blocks you have to have in place. And for us, I think we're putting those in place that will make sense for us. And we'll turn it on when we think it makes sense. And it will be a customer at a time because not every customer is going to feel the need for someone to help them manage something that they recently bought. That's just the way it is. I don't know how many of you do preventative care for yourselves, or do you go to the doctor when you get sick, that's the concept. Most people react when they get sick. That's exactly how an owner operator works with these fields as well. So there needs to be a little bit of a pain absorbed before people understand the value of what O&M can bring to the table. But the way that you bring it to the table matters because you can do this a lot of different ways, and most of them are not scalable where you can make money doing it long term.

Nice. How do you think about sort of when you think about the balance sheet metrics improving as a -- I'm going to try to frame it this way. So moving down the income statement, having that kind of a healthy EBITDA margin return, then in turn it affords you a certain level of latitude from a balance sheet perspective and cash flow to lean into this opportunity as well, right? I suppose that's part and parcel of this. I'm looking a little at Tim's direction if he wants to chime in, but -- why don't you run with it in that regard?

We don't feel capital constrained at all today. We don't -- we're not capital constrained today. I think we ended the quarter, $85 million in cash and an undrawn $400 million revolver. So that's -- today, even our balance sheet really isn't an issue for us.

Perhaps if I can clarify, it gives you -- it really affords you a lot of latitude prospectively. That's kind of what I'm thinking about is capital allocation.

Yes. And if you think about our capital allocation, across all of Gibraltar, we're pretty asset-light. So less than 2% of revenue on CapEx is generally what we spend, $20 million maybe a year. We did a stock buyback we initiated about a year ago. It was a $200 million 3-year authorization. We spent about $110 million of that. We're not committed to spending the rest. We'll spend the rest opportunistically if we see the need. But our focus really is to grow through M&A. Not specifically solar only, but our whole portfolio, right? There's -- in each of our businesses, we think we see opportunities where we can expand what we do for our customers in a meaningful way.

And I would add, we generated a lot of cash in the last 3 years. Having the rest of the portfolio has really been helpful because we actually have invested pretty heavily into our renewables business with talent, systems I mentioned earlier, our equipment that we use for installation. There's a lot of autonomous vehicles associated with that. I mean there's a lot of things that needed to be done that we've done and we'll continue to plow forward. But part of the reason we're able to do that is we had the rest of the portfolio really turn in pretty well. So we're in pretty good shape to be able to move forward on about anything we see makes sense.

Right. I mean how do you see -- I mean, just to kind of come back to that on M&A, I mean building out the renewable business is still the focus when you think about that? Or like other adjacencies and other sort of verticals?

Yes, I would say we have 4 segments. So Renewables, residential is our biggest segment. Clearly, a lot of opportunity there. Our Agtech segment, there could be opportunities there in the future, probably nothing today. When we look at our Renewables segment today, it's unclear what we need to continue to grow at a pretty good pace and generate a lot of cash. So we do keep our eyes open when we look at it. Bill mentioned O&M. A way to get into the O&M business is to buy in. But to Bill's other point about O&M, the industry hasn't yet really adopted O&M in a meaningful way in a way that's interesting to us yet. So there's O&M companies that cut grass. That's not what we want to do. We don't want to go out with window washing equipment and robots and clean panels. It's the remote monitoring and addressing the issues as they arise. The challenge is until there's enough scale of people doing that, I think the companies that are out there doing that are privately held. We've seen many of them. They're sort of subscale at this point.

I mean we've kept an eye on everybody. Look, the multiples were extraordinarily high. They didn't need to be and they've come down dramatically. So we've been patient there, particularly for the newness of a lot of these businesses that weren't making a lot of money. I think the other thing we said up front to everybody is, look, our role -- our goal here in the next 12, 18 months going back that time period is we've got to get our Renewables business right. We're in the middle of a pretty strong macroeconomic set of headwinds and I just wasn't comfortable that our investor base would feel great about us going out and doubling down on some more stuff in the middle of a lot of unknowns. So we said, "Hey, let's hone in on getting the core business right and let these valuations kind of settle in." We're here for the long term, so no reason to jump. And there's a lot of, I'd say, a lot of stupid money floating around on some -- a lot of shiny toys floating around that weren't so shiny, and so we decided that we would hold tight until we saw things evolve.

And sorry to keep going, but just to continue with the metaphor here. Things haven't necessarily percolated back to more reasonable levels. I mean we haven't quite seen that -- the flip side of this of some sort of quasi distressed environment where you can pick things up quite yet. I take it, right, maybe that's coming, but you're not quite there yet.

Yes. We're not necessarily looking for something distressed as much as just something that's not so incredibly overvalued that can get a return for shareholders. But multiples in the 40s and 50s on companies that weren't -- never had made any money, that's a tough sell to your investor base when you've got all these headwinds we just talked about. So it's just -- it's being patient. It's a long game for us. We got in this for a reason. We're not here to flip it. We've been in it for 8 years as a public company, longest standing probably in the industry. So we will be surgical about what we're going to do. And the key is, at the end of the day, you've got to deliver, and that's what I think people inherently are looking for. So that's my first priority, period.

Absolutely. Maybe just pick up on the last comment a little bit further, if you don't mind. Going back, Tim, you talked a little bit about buyback. And again, like, I dare bring it up, you have remaining authorization. How do you think about the parameters that you're looking for? Because at the same time, you mentioned M&A first. I get why. You've got these -- you talked about strategic pivots and opportunities. You guys are in an interesting place. I get why that might be more of an interesting direction, but I'm curious the premise that you would look at buyback, just given kind of a wider pullback in a higher rate environment here?

Yes. I think if you look at where we bought back -- where we bought back, we were in the mid-40s. Our stock has dropped pretty significantly. Our earnings didn't, our fundamentals didn't, we were generating a lot of cash, but the market reacted to some external factors. And we saw an opportunity on -- just like M&A, we're pretty sure we can generate a pretty solid return for our investors. I will say this though, you can't buy back stock to grow the company, right? It's just -- it's not really an investment. It generates a decent return for shareholders when your share price recovers, as ours has. But to really grow the company and create value for the long term, you got to be -- it's -- you have to have more businesses that are generating more cash. And so I think if the opportunity provides itself and we see a really good value and a really good return on stock, and we look at our acquisition pipeline because at the same time, we were buying back stock, we had some opportunities, but we were -- like Bill said 18 months ago, we sort of said we're not going to go into a couple of these markets for a while. We've got to fix some internal stuff. It was a really good opportunity for us at that time to buy back shares. We still have 1.5 years, a little over 1.5 years left on our authorization. And we talk about it every quarter with the Board. We'll see -- as we do it, we'll let you know, but M&A is the #1 capital allocation, I would say.

Right. Absolutely. Just in terms of -- one more twist on this. I got this question earlier, but I figure it's worth bringing up now. We've seen a litany of new products, right? Like, for instance, we've got some track companies out there offering, hey, now I've got a quality product. They've got a value product. They're trying to hit more ends of the market to try to expand their scope. I've seen this a little bit from players. I'm curious, does that resonate with you guys? I mean obviously, you talk about fixed-tilt and tracker. You can you give your people options. But even within that, I mean is there kind of -- even within the C&I space, for instance, is there a place for kind of different targeting niches more or what have you? I'm just curious, again, I get that utility scale, you have more of this bifurcation of how people want to tackle it. But as you think about your opportunities, does that make any sense?

We haven't seen that as much. I mean again, as I said earlier, we start with a piece of land getting a return for you based on your set of parameters and that, it will be what it will be. I will say the one delineation between maybe 2 groups is if you're selling to someone that's flipping versus someone who's going to own or operate. So they may invest differently upfront if they're going to own and operate versus if they're going to flip. That's about the only -- but that's not new, that's been around for some time. But I haven't -- we haven't really seen a better, best type of scenario. We don't necessary ascribe with that ourselves because it's really never been about the product.

Right. It's about the solution.

I would almost add, if you think about structural engineering, which is a big piece of what we do. The system that you put in an area that's not going to get any snow and the winds aren't really high is inherently less costly, and it's less beefy than something that you're putting in the Northeast that's going to get wind load, snow load. So I'm not sure what the competitors are doing with -- if that's what they're addressing, sort of I have a few SKUs. We're not an SKU business. We really -- within a product family, it's always design the gauges deal, the length of spans are all designed for that piece of land for the panel that's going to be put on it and from the wind load, snow load environment that it's going to be in.

Yes. I hear you. Look, I just -- we got a couple of minutes left here. I want to make sure we're hitting it. I mean when you think about the C&I market, right, I think I heard you say permitting definitely what you want to be watching. I mean what is the growth rate of the C&I space, right? I mean I know that we talk writ large at times about the utility scale space being kind of a teens growth business across not you guys, but just broadly across the space. How do you think about the opportunity, right, over the next few years? You talked about a teens growth rate yourself. What is that market growing? Are you're gaining market share?

I think we're a proxy for the C&I market because of our size. So I would suggest that if we were growing 18-plus percent for 5, 6 years, TerraSmart was growing at the same -- similar rate and we're #1 and #2, respectively, I think the C&I space, I'm not sure it gets the same kind of visibility of credit that the utility space does relative to inherent market and growth rates. But guys, we've been living in it forever. And it is -- unless we're doing something incredibly awesome relative to the market, the market is a mid-teen to high-teen growth, at least that's been our experience, and that's reflective in our business.

And if I can dare ask it this way, we've never really quite got this promised IRA bump, if you want to call it that. For every reason that you delineated a moment ago about, well, we had a few years of challenges, is there going to be any such bump? I mean I don't hear it from you. I hear that you're getting better in a healthy place, but I don't hear that there's any kind of step function from here in growth either.

I think when IRA came out, you saw more interest in people coming to the industry. We're 2 years into it, still don't have guidance from the Treasury on the incremental benefits. But the reality, what the IRA has been for the first 2 years is you get to keep the investment tax credits you had before. If you don't use prevailing wage, then you lose it. That's the IRA, what it means for the first 24 months and up until whenever we get the incremental benefit. So I think what we hear from customers is there was people moving forward because they assumed that this was going to happen, then people paused because they weren't sure if it's going to happen. Now people are moving forward, saying, "I don't care if it's going to happen because I can't stop, I can't put myself out of business so I'm going to move forward." And I think a lot of people feel like it will be retroactive. So between that and interest rates going up and all the other things we talked about, listen, if you can plow through this as a developer in APC, at the end of the day, the industry is down versus where we thought it would be for the last 2 years, but there's still a heck of a lot that was installed during this time frame. So there are a lot of people that are still having a good experience. I do think returns are probably not what they once were, but I think they're very manageable. And I think most of these developers look at this as a portfolio. And so they're going to have some good projects and some not as much, but on average, they can continue to get a good return. And it's construction. They know it's not going to be perfect every time they go out and do something, but I don't think they'd be moving forward if it were bad. Just simple -- it's a simple minor way for me to think about it, but they're finding offsets to some of these headwinds.

And notably, in your list of issues, if you will, I didn't hear you mention like transformers or labor availability. Both of those have come up in different permutations of prior conversations. Curious, do you have any thoughts? I mean again, that's all about being organized and sticking to a schedule, typically.

Yes. I mean we control -- I mean we -- when we talk about labor, it's our labor for the install. So we've been able to manage through that relatively well. It's still -- it's not as easy as it once was, but I think it's getting easier than it was. But that's just a matter of -- we've got an independent group of contractors that are exclusive to us that we've built over the last 10 years. We have all our internal project managers. We've done a lot with autonomous vehicles and other types of equipment to help make that experience that much more productive. If you can do things like that, you get a little less labor dependent than you were a few years ago. So a lot of things that we've been doing, whether it's in our factories or in the field, have been around how do you require less labor than you would have otherwise. So there's a little bit of that that's helping us. I think the market is a little bit better than it was. The cost of labor is not continuing to go up. It's still high but it's -- I think it's subsided in terms of this rocket ship it was on for a bit, along with when you have a labor-oriented business like what we have, there's hotels, there's gas, there's transportation, all of that stuff factors into your operating cost and that has also started to subside a bit. So it's all leaning in the right direction for us, but it's been controllable up to this stage.

Excellent. Any final points do you think we should -- we have like a minute or 2 left here. Anything that you think we didn't hit? Any important updates that we didn't -- we passed over in passing here or what have you for the purpose of this conversation? Anything you wanted to communicate?

Nothing I don't think we hit. I would say, guys, we run under the radar because we're not a pure play, and we get that. The strength of what we do is built on a foundation around these 4 pillars, and we're trying to attack some pretty big problems in the world where food is one of those, that's Agtech. Energy is the other, and that's half of Gibraltar and that didn't exist 6, 7 years ago. But we like the makeup of who we are because it gives us the bench strength, the balance sheet, the cash generation to be in a position to make the investments during tough times as well as good times. And so I'm really looking forward to letting people see what happens with our business now that we've invested the way we have the last 2 years during a really rough time in this industry. And we're here for the long term. And like I said upfront, we're not trying to be the biggest, we're trying to create the most value. And hopefully, that works like we think.

Transparent, indeed.

So we do appreciate the time today, for sure.

Absolutely. Thank you, guys for dropping through. Really appreciate it. You guys take care.

Thank you.

Thanks, everybody, for the questions.