Valmont Industries, Inc. (VMI) Earnings Call Transcript & Summary

Good morning, and welcome to Valmont Industries' 2021 Investor Day coming to you virtually from our Omaha, Nebraska, headquarters. My name is Renee Campbell, and I am Valmont's Vice President of Investor Relations and Corporate Communications. While we certainly would prefer to be with you in person today, we're very happy to be able to host this event with you virtually. This year, we are celebrating our 75th anniversary as a company. And on behalf of the entire Valmont management team and our more than 10,000 associates around the world, I want to thank you for joining us this morning for our third Investor Day. We look forward to spending the next few hours with you. Before I provide an overview of our agenda, a reminder that today's presentation is subject to our disclosure on forward-looking statements, which is outlined on the slide in front of you. To summarize, the information provided during this event will contain forward-looking statements. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause the results or outcomes to differ are noted on this slide as well as in company SEC filings and press releases. So with that, we have an exciting agenda planned for you today. First, our President and CEO, Steve Kaniewski, will share his strategies for delivering long-term profitable growth to our stakeholders. Steve will talk about how we are building on our strong ESG foundation and accelerating growth through addressable market expansion, as well as infusing technology and innovation throughout our businesses. He will also discuss ways that we are advancing operational excellence and optimizing our organization for higher growth through a focus on talent development. He will also take a few minutes to discuss our recently announced acquisition of Prospera Technologies. This transaction accelerates and expands our irrigation technology leadership position, and creates the largest vertically integrated AI company in agriculture. And we're very excited about our future growth in this space. Steve will conclude his presentation with highlighting our financial goals for the next 3 to 5 years. Next, you'll hear from several members of our senior leadership team, who will share the ways that they are executing on our growth strategies, while reshaping their businesses and leveraging our global footprint for market expansion. Each leader will share his or her vision for doing so with a focus on market disruption, technology and innovation, while furthering our ESG initiatives through our products, services and solutions, all in support of our long-standing tagline, Conserving Resources. Improving Life. And finally, our Chief Financial Officer, Avner Applbaum, will share his vision for transforming our finance function, using advanced technologies, including AI and machine learning, and forming centers of excellence within finance to create value and improve return on invested capital. Avner will also discuss capital allocation strategies and provide an update to our 2021 financial outlook, as well as highlighting our financial goals for the next 3 to 5 years. We'll finish today's formal agenda with a few closing remarks from Steve. I want to share just a few words about logistics today. We'll be hosting 2 question-and-answer sessions facilitated by me. The first one will begin around 10:00 Eastern time, followed by a short break. We'll plan to wrap up our prepared remarks just before noon, leaving about 30 minutes for additional Q&A. You may ask a question at any time by typing it in the Q&A box located at the bottom of the media player. We'll get to as many questions as we can today as time allows, and we'll follow-up with you as soon as we can, if we can't get to your question this morning. And questions are always welcomed by sending an e-mail directly to me or to [email protected]. Now I'd like to share a brief video in recognition of our 75th anniversary which will be followed by our President and Chief Executive Officer, Steve Kaniewski. [Presentation]

Good morning, everyone, and welcome to our 2021 Investor Day. I am very happy to talk to you today about the state of Valmont's business as well as its future. My name is Steve Kaniewski. I'm President and CEO of Valmont, and I've been with the company since 2010. I've served in various roles, both in our shared services area, our business units in Utility and Irrigation, as well as COO and CEO since 2018. There are a few key messages that I want you to take away from today's discussion. First and foremost, we are building and expanding our ESG foundation within the company. Our company was founded 75 years ago on just one of these very principles of sustainability. It has grown since then, and I'm proud to say that our portfolio is now stronger than ever in this area. And I will cover it a little bit more in the presentation. Two, despite the fact that we are in great markets with enduring long-term drivers, we are now working on initiatives that will further accelerate our growth. A lot of these will be around products and services, technology, and global expansion. Three, we're infusing technology throughout our entire portfolio. You will hear today from each and every person in the business about how they touch technology within it. That will help us to drive efficiencies in our operations, as well as revenue and operating profit within our businesses. Four, we're advancing our operational excellence to go beyond what it used to be. What you will hear from the team today are things like Industry 4.0, lean and agile development. And you will hear it throughout all the presentations. The strength of our operations now is dependent upon technology. With a fight for skilled labor across all of our various businesses as well as the ability to do things quicker and more responsive to our customers, it now plays a bigger part of our operations. Lastly, you will hear clear strategy and how we're working to execute upon it. Every one of our businesses goes through a cycle of strategic planning. Every one of our businesses is focusing resources and their best talent to execute upon that strategy. It is around a couple of pillars, which I will talk to you later about. Now what is Valmont? Valmont today is roughly a $3 billion company in over 22 countries, with 85 manufacturing locations. We're broken up into 4 segments. As you see in the presentation, our revenue is broken up fairly distributed across the portfolio. There are 2 segments that are in the billion dollars' worth of sales range. Our Utility Support Structures segment and our ESS segment. Coatings is a service business that continues to grow with industrial production; and Irrigation, which was the foundation of the company more than 75 years ago, still represents a significant share of who we are. On the operating profit side, you can see that we both have strong operating generation out of Irrigation, opportunity in ESS growth in our Utility Support Structures segment, and Coatings, which is always a consistent performer. We're focused around 2 large markets, agriculture and infrastructure development. This is our global footprint. It is one of the things that brings us a competitive advantage as we operate around the world. Whether it's the strength of our supply chain or the ability to manufacture where the product is needed, it is the basis of our growth. As you can see, 71% of our plants are in the Americas, 14% in EMEA and 15% in the Asia-Pacific area. The key thing that we look for in this is that we are always #1 or 2 in those markets that we serve. If not, we do not have pricing abilities, control or the ability to move price through the market when periods of rapid inflation take place. What makes us different? At the end of the day, companies and, in particular, industrial companies are a series of assets, machines, footprint plants, but its people is what makes the difference. And I start with our core values of passion, integrity, continuous improvement and delivering results. It is these 4 core values that make Valmont who they are. Our people have a passion for what they do. Many of you will drive by our products every single day and not notice. Yet our engineers, our salespeople and our operations people have taken the time and the effort to design those products safely and to last and endure. Our focus areas are around sustainability, around market development, technology advancement, and at the end of the day, a return on invested capital focus. Without a return of capital to shareholders, why should they invest? So our main focus and our proxy for shareholder returns is centered around that. As you can see, over the past 15 years, we've returned approximately 12% compounded. Now I want to take a moment just talk about our Board. We have a top-notch Board that is well diversified in terms of skills, in terms of it being diverse itself and having a balance and a mix of both people who have been on the Board for a while as well as relatively new participants on the Board. It is this diversity, which gives us the crux of our governance. Our governance is second to none, and our Board is a testament to that. Let me talk to you about some of the team that you will see today. It is this very team of experienced leaders who have both been with the company, and had seniority as well as new entrants and new blood that have made us strong and have set us up very well for our future. We are -- have a combination of executive officers, corporate officers and business leaders, all of whom are top of what they do. I want to thank this team personally for all their efforts to make Valmont who they are and to guide us in our future. So now I'd like to take a few minutes to discuss what we've accomplished since our last Investor Day in 2018. Over that time, we have built and aligned the organization in a different way. We've diversified our Board of Directors. We've onboarded many new positions across the organization, including a new CFO, an Executive Vice President of Operations, Senior Vice President of IT, HR, as well as appointing a VP for Strategic Marketing across the organization. We've stepped up our talent development process across the entire organization so that we can identify and develop talent earlier on in a person's or individual's career within Valmont. The best way to hire is to hire within and it is a principle that we will look to do more and more of in the future. We've executed upon our transformation plan around shared services and operations. They are now off and running, and I'm happy to say that their efforts have accelerated to create standard work and cost efficiencies across the organization. With new product development, we've started with a true focus on the voice of the customer. Not just the specification that they're asking for, but ultimately, what problem are they trying to solve. This has led to many new business opportunities, whether it's drone inspection services in our Structures business to ultimately the culmination within the Prospera Technologies acquisition of using less inputs and generating more yield on the farm. We've also built pathways to growth across the organization. We focused our strategic technology investments so that we can generate both operating efficiency and new revenue growth. And you will hear a lot more about that today. Our capital is also flowing where it needs to around technology, around strategic investments that are necessary despite the market conditions to advance our efforts. And we've actively managed the portfolio. If we see something that has no long-term prospect to beat the cost of capital, then we find a way to exit that business. These are our 3 pillars for long-term profitable growth, and you will hear more about them as you listen to the various presentations. Our operational excellence is now infused with ESG principles. So everything we do, we'll look through the lens of sustainability as well as the effect on our workers from an inclusion and engagement perspective. We're also accelerating innovation by optimizing our talent and technology to grow. So I talked earlier on about ESG. On the environmental side, we are doing more than just compliance. We are working on market differentiating data points so that we can show that all of our products and services are aligned with a sustainable world. We've embarked on carbon sequestration studies. We've looked at the footprint of our products and services, and we will be marketing them as we move forward in a very sustainable way. On the social side, this past year, we started 3 employee resource groups. Our Women's Leadership Council, the Indian-American Leadership Council, and a Hispanic organization for leadership and advancement. In 2019, we implemented equal pay. We did this before we were asked to or pushed to, as it was the right thing to do in evaluating our talent. Also, many companies invest their money back into the community, and we are no different. 1% of our operating profit is given back to charitable organizations across the world. But not only that, our executive team, just as an example, spent 4,000 hours last year, helping and assisting and taking their know-how to those nonprofit organizations so that they could give back to the community. On the governance side, we've always had a strong and dedicated board to the shareholders. This obviously will continue as we move forward with a new emphasis on inclusion and diversity, as well as getting out a statement on human rights over this past year. We look as -- to ESG as a differentiator of your investment money. We know the companies that follow these principles, typically have better returns and a better atmosphere with which to work in. You will start to hear more about this as this is one of my own personal initiatives that I lead within the company and that we started an ESG task force in 2020. I won't belabor all the points that are on this chart, but I want to speak to you about how we view our sustainability journey. So going back a few years ago, till now, was really focused on compliance. And to that end, even on the compliance front, we have saved money, and we've done things much more efficiently and directed throughout the company, creating standard work across the entire portfolio in this area. We are now moving into resource optimization. So what does that mean to us? It means we're setting goals on combustible fuel, water, gasoline, carbon intensity. We're putting that out there for our shareholders to evaluate our progress and our attainment. We have action plans in place to achieve all of them, and we feel very confident in our ability to make the world a better place. Ultimately, we will take strength upon strength and move it into market differentiation. We're going to move quicker than our competitors and our peer companies. We know that this is an area that many people care passionately about. It is what founded our company and what still drives us today. And so to that end, we will make ourselves accountable to the markets by disclosing more and more. Ultimately, our goal is to become purpose driven, the who-we-are as a company to be completely tied together with our products and services that help the world. At the end of the day, this represents how we do business. There will be different frameworks, there will be different metrics, but we will always lead and not have to follow in this area. So to that end, how do we hold ourselves accountable? You will see a number of 2025 environmental goals with the reduction of carbon by 10%, reducing electricity another 12%, and global combustible fuel down almost 19%. We will be reporting on these during various earnings calls and updates as well as in investor conferences. On the employee and community side, we will have 3 new ERGs this year. And I'm proud to say that all of them are well engaged and feel that their voice is heard. Most importantly, we are going to increase by 50% people of color within our organization. That is not an easy goal. We will have to do things differently. We already utilize balanced slate, look for multiple candidates, but ultimately, we have to be innovative here as well. But it is a goal that is worthwhile for us to undertake. And we will continue to give back to the community with the 1% of operating profit and the dedication of our executives' time. So what makes me excited about our business? Throughout the day today, you will hear the drivers for growth across them. In the Utility Support Structures segment, there will be grid resilience, renewable generation and an increase in the use of services and technology to ensure that, that grid works properly. In our Engineered Support Structures segment, infrastructure renewal is abound across the globe. It's necessary for economic development. That, coupled with 5G rolling out across the globe, as well as bridging the digital divide that exists, these will be growth drivers within this segment. In our Coatings business, the continued protection of critical infrastructure continues to gain ground. And with one of the best corrosion protection carbon scores out there, our Coatings business stands poised to reap the benefit. And in Irrigation, food security. If the pandemic taught us nothing, it is that food security is vital for countries. That, in addition to all the ESG focus that's coming in through agriculture, should help to continue to drive the growth across our Irrigation business. Now when we frame up technology in our business, we do so in 4 ways. And this is what you will hear in the presentations today by the various presenters. First and foremost, the Internet of Things. How do we sense? How do we gain data? Why are we in a unique position as compared to others in order to do so? You'll hear about Industry 4.0, and the impact on our internal processes by using RPAs and other AI sources. We're building recurring revenue streams across many of our businesses. And listening to the voice of the customer, working to enhance our digital customer experience, with something as easy as status of their order, to advanced analytics and test reports. Now we're optimizing the organization to grow and to continue that higher growth pace. And it starts, first and foremost, with the leadership that I talked about earlier. All of our leadership is aligned around these principles of disruption as opposed to being disrupted. So we are pushing the envelope. We're spending money where we should in those areas to be more productive. We've changed our organization to align for growth. And ultimately, our lean and agile process orientation will help us to achieve it faster, quicker and more responsive to the market. I mentioned earlier that we have a deep focus on talent and having an inclusive culture. We have many initiatives across the organization right now that will help us transform, stay close to our values as a company and always listening to our employees. Along those lines, we are now subscribing to the JUST standards that are out there. We believe that our talent is, just like our footprint, one of our differentiators. So we'll take the time to ensure that people, want, desire and work with Valmont for the long term. It's very possible in Valmont to have a career and yet have many different roles across our business units and across our geography. One doesn't have to leave Valmont to spend a career in a lifetime. Strategic M&A is very important for us as we look forward. Our recent acquisition of Prospera is a testament to this, that we will have filters. Some of those filters are around technology, rounding out our portfolio. They will be focused more and more to our high-growth businesses, such as telecom, solar, and irrigation technology. As I mentioned earlier, we look at everything through the lens of global. If we cannot expand our footprint with the product or service across the globe, it probably doesn't have the best return on invested capital profile. And thus, that will be a filter of ours. We will always look for strong sales and operational synergies. And our return on invested capital has and will continue to be that -- we can beat our cost of capital over 3 years. And the business must generate free cash. Now this acquisition of Prospera is one that gets me very excited, and I believe it will to you as well. Prospera allows us to create the largest integrated AI company in all of agriculture. And as you go and learn more about Prospera, and we will talk more and more about them, there -- it's a very unique set of circumstances that we are -- can apply to the agricultural space. There is lots of data centered around the beginning of a grow season. There's pretty good data at the end of the grow season. But there is not lots of data in season. Not only is there not data during the in season to the volume that artificial intelligence needs, there's very little way to then affect change during the grow season. The combination of our pivot with the artificial intelligence of Prospera, now brings together a closed-loop system to generate massive amounts of data in season to make the algorithms and the agronomic decisions stronger and more relevant as well as tie back to affecting that in the field. Nobody else has this kind of solution. Our partnership over the last 2 years has bore this out. We are seeing very strong adoption rates. It will build a recurring revenue stream. But ultimately, it will be different than our Irrigation business. We will not be limited to the traditional pivot market. We will be able to go to the open field or other irrigation methods that exist out there. Some we'll do ourselves. Others, we'll do through partnerships. But with the strong margin profile that comes from a technology business as well as the need of growers to reduce inputs and increase yields in order for us to get to the next stage of agricultural development. We have to feed 2 billion more people here on earth by 2035. And the only way that we can do that without further land destruction and more use of inputs is through technology. Many people can say, "Well, I have a drone, I can take a picture of a field." But now imagine thousands of pictures. Would you be able to go through all those pictures and figure out what's the crop doing? What bugs are affecting it? Is it getting enough water? That's the power of Prospera. They can look at this through the use of computer vision and the cloud to now identify the areas that need to be addressed. I look forward to talking more about this in our second quarter call as well as in the future, in more detail. [Presentation]

So as you can see, farmers and growers everywhere will adopt this technology. It excites them. They will put their money where they believe they can get a return, and this product and this service has proven that. We will be the industry's first mover in this area. The nice thing about doing that is you can't throw that much more money, that much more resource, because you have to grow the crop. The crop must be grown season after season. So the only way to get data is to go through the growth cycle. So the 2.5 years that we've already invested in this area give us a significant advantage. It's well aligned with our ESG principles of conserving resources, improving life. It has a very unique model, different than anything else out there in the marketplace, and as I mentioned earlier, will allow us to go beyond irrigated acres in the world to all acres. So I'm very optimistic about the Prospera acquisition and how well it will work within our business, as demonstrated over the last 2 years. As you look across our portfolio, we are in a unique and compelling position to take advantage of market growth whether it's our organic growth initiatives, our new products and services, or the geographic expansion that I talked about earlier. The key drivers in our business remain strong, along with some new ones, like the demand for renewable generation, for grid hardening, as well as food security and the reduction of inputs. Our new technology drivers around smart technologies. You will hear more from Aaron Schapper, specifically in the infrastructure space, as to how we will become the gateway for sensing and IoT. And the digital farm and data science continue to grow as drivers in the marketplace. And we are very well positioned in all of these. So you've heard me talk about growth, profitability, our core values, how we operate as a company, but ultimately, what does it mean? These targets, our financial targets over the next 3 to 5 years, is the culmination of everything that you'll hear today. And our plan, as we execute upon it, will allow us to achieve 7% to 12% revenue growth, greater than 12% operating margin, 13% to 15% earnings per share growth, higher than 11% return on invested capital as we reinvest in our businesses for growth, as well as continue to generate the free cash flow that we have demonstrated over time of 1x net earnings. There's always some key assumptions with these, but ultimately, acquisitions will bring us to the top end of the revenue side. And our operating margins will be led by our operational excellence initiatives as well as the synergies through acquisitions. We will continue to reinvest capital across the organization aligned with our growth principles. And now I will turn it over to Lennie Adams, who will talk to you more about growth in the Irrigation segment.

Thanks, Steve. I'm Lennie Adams, Group President for Valmont Irrigation. I've been with the company 42 years, and have worked in numerous capacities in the other business units that you'll hear from later in this presentation. But have been lucky enough for the past 15 years to be the Group President for the Irrigation division. And while we've been very successful, the best is yet to come, in my opinion. We'll list here some key messages that you'll hear throughout this presentation. I'm not going to go through each one of those, but I think you can read them and see what we want to reference. But the key part I'd like to reference is the final one relating to financial performance. This is a cyclical business. And during the downside parts of the cycle, this business performs very well. Again, great returns and decent operating profit percentages in the down part of the cycle. And in the up part of the cycle, this is a fantastic business with very high returns and significant return on invested capital. As you look at a quick snapshot, this shows 2020 revenue for us, which, frankly, in 2021, is going to be closer to $840 million. We show significant growth already, some of that is price, but a lot of that is volume as well. Relating to our operations around the globe, 7 are manufacturing and the balance are warehousing and distribution. We have 1,900 employees, and the mix of our sales are 60-40 between North America and international in 2020. But frankly, in 2021, will be closer to 50-50, in my opinion. We look at our business in 2 particular segments, our portfolio in 2 different segments: Valley Water, which is the traditional machine, and water application and things that go with that, and Valley technology, which is Valley 365, our AgSense products, our scheduling products and things that come now with Prospera, like Valley Insights. Global footprint. As you can see by the dots on the chart, the references to what I just talked to on the prior slide, but you also -- the key part here is the fact that of our opportunity to do a split shipment model that we've had for a number of years. What that really is about is this issue of providing customer satisfaction on a global scale, usually for large products, that maximizes freight, maximizes cost and efficiencies that come with it, and leverages the global supply chain to provide the best product at the lowest cost for our customer satisfaction. An example of this could be gearboxes out of North America, structure out of Dubai, and sprinkler parts and miscellaneous other parts of control panels that come out of China. And they all combine in the same time at a large-scale operation for an installation in the Middle East. That would be a great example of what we do there. As it relates to our competitive advantages, it's the Valley brand. The Valley brand is what we are about, it has been. And we have to protect this and keep this in place as we go forward. Our global distribution network is second to none and a key part of our brand. They're what represent us every day in the marketplace and are very, very important. They are the best in the industry as referenced by surveys we take and also by feedback from competitors, to be frank. Everyone else is trying to emulate what we've put into place. Technology leadership speaks for itself, but I also think it speaks to the recent acquisition of Prospera and what will come with that. And you'll hear more about that later. Valley University is something we started investing in 10 years ago, has been a significant way to train both our dealers and dealer personnel, but also employees on all the different applications that we sell and have to service. A big part of this is the way to do it virtually and online, and it's been significant. We have over 1,000 courses in 6 different languages that come out of Valley University. Our global reach, so we already kind of showed you that and how that works, but with global reach with a local presence. At the end of the day, it's still that dealer relationship and the grower looking at each other in the eye and signing that order and signing that PO. Relationships are a key to this business. Connected machines, we have 124,000 as of the end of last week. It changes on a daily basis. It's significant for us and provides this technology leverage point and the stickiness, if you will, to our customers as we go forward for further technology products. As we look at market demand, there's long-term drivers and short term. The long-term hasn't changed much, to be honest. Water is still significant and important. And the issue of water is of all the water in the world, only 3% is fresh. And of that, 2/3 is locked in ice caps. Of the balance, 2/3 of that is used for agriculture to feed the world. And the forecast is for 2 billion more people to be in the global population by 2050, and they'd like to eat as well. So we have to figure out how to make the most efficient use of water to, again, feed a growing population. We also have the issue of food security that's come out of part of this pandemic that we all just lived through. Many countries around the world, this is their most significant thing they want to put in place going forward after they've lived through the past 18 months to 24 months, and what has occurred. This will be a big driver for our business over this time. Yes, there is a replacement market. We've been doing this for 75 years, and even though the machines last way too long, there is replacement opportunities on a yearly basis for us. ESG -- elevated ESG as we're hearing it from everybody everywhere, especially large national accounts as they're all trying to be ESG friendly, if you will, and the things that go with this, big drivers. Short-term commodity prices, always important. Again, they're in a good spot now. They weren't so good 2 years ago, but this plays into what I'll talk to in a few minutes as well. Farm labor continues to be an issue. It was before the pandemic and will be after the pandemic. And it's the issue of keeping younger people, if you will, on the farm or in rural areas or wanting to live into rural areas, and to do what these jobs are. They are difficult, tough jobs. But at the end of the day, they're also a job that you could look yourself in the mirror and be proud of at the end of the day. As we have more and more tech to help take some of these labor issues out of the operations, that becomes a driver for our business and the technology side as we go forward. Which brings me to the end, which is really the biggest one because it should have been at the start. It's net farm income. You've got a slide here that just wants to show you in North America, and it goes back to 2009. And 2009 to 2014 were, what I describe as, the best of all times. 2013 was the best year ever that we've ever had in the Irrigation business. And also turns out, it was the highest net farm income year. You see the light blue bar there, though, shows that government payments were at a small level at that point in time. In contrast, if you go to the right of the slide to 2020, it does show net farm income of $120 million, not all that far off from '13, but look at the light blue bar. $46 million came from government payments or stimulus payments. It's not that, that's bad. Not that, that money doesn't spend, that's not my point. But my point is it was artificial stimulation. And the stimulus did just what we wanted. The farmers spent it. And they spent it in decent ways. We had a very strong finish to 2020. And as we head into 2021, we have a very strong first half for the year and look for a full year as well. The significant part of that as well is the fact that it averages. Back in the good old days, the averages were significantly higher than what it is now. So many people have asked, "Are we back to those good old days?" My stance would be, no. And that's not necessarily a bad thing. We aren't quite there, but that doesn't mean we're in a bad situation at all. And the forecast we see for the next couple of years shows farm payments going back to traditional levels, but net farm income being at very acceptable levels, which should be a good driver for this business. As we look at our current base, as I said, we're currently at $840 million. As we look to go forward, we're looking for organic growth as a part of this, which is large accounts, key accounts, consolidation that's happening within the industry. It's not that a family farm isn't important to us, it will always be, and always be a part of this mix. But the trend is for consolidation and how this is happening, and we need to be a bigger player in this and have invested significantly in our key account process and the things that go with this. We're also looking at higher value crops, coffee, sugar beets, carrots, those sorts of potatoes, even though we do some potatoes now. But the application for higher-value crops for our type of irrigation and what it does with the technology we're going to be able to offer. It's significant, the opportunities are great, provided that the field size is such that a pivot is the answer to what this problem may be. Lastly is the international growth opportunities, been significant. You're aware of the large project that we took last year in Egypt for $240 million. This is being delivered this year and next. That's significant. We have 2 or 3 other projects right behind this. And the pipeline, as it relates to opportunities internationally, is target rich, to be quite honest. It's pretty simple, as simple as this, look at the map of the world, all the opportunities, North America has been the biggest driver relating to irrigated agriculture and agricultural production for a long period of time. But the rest of the world is a great, big place, and there are many opportunities in the world that have every bit the opportunity in North America does over time. We've been doing this for 75 years. It will take some time, but the opportunities for growth are significant. As we look for our strategy for long-term growth and our pillars for growth, it's centered around operational excellence, expanding markets and accelerating innovation. Under operational excellence, you can read most of what that's about, and it's really ESG-focused for a lot of this. But the third bullet is most significant here, in that we are investing in developing methods and means by which to apply, if you will, applications to the individual plant within a field instead of even a section of the field or, in the old days, actually the whole part of the field. That's significant and it's something that will be coming here in the near future for us. Under technology drivers as well, the issue of power and power -- and local power issues and to avoid peak energy charges. Our software allows for this, in conjunction with working in utilities and growers can in many times be paid for running their pivots in the off-peak hours and doing the things that need to be done to keep the grid manageable for the utility. It's significant. The last bullet is around solar. We have invested in 2 solar businesses over the last number of years. First is Solbras, and the second was Convert Italia. The application that I'm showing you in a picture here is application in Mato Grosso state in Brazil done by Solbras. You can see the array -- the solar array on the left-hand side of the picture pivot up in the left-hand top, and then the traditional farm was storage, drying bins, all that sort of thing that go with the traditional farm application. This was roughly $0.5 million installation that has a 5.5 year payback. And it's important in this particular area. Number one, it's ESG friendly; but number two, it has a great payback. The issue in Brazil is a reliability of power and also the cost of power. So this business is growing right now and providing real opportunities. We're testing it out here, and it's proven. We're now going to bring this application to North America this fall, and it will be applied through our dealer network and give our dealers a chance to add another way of generating revenue, but also give us a way to continue to grow this business and frankly, in an ESG-friendly way. As we look at expanding markets we serve, we have water scarcity to address and the international food security. Regarding the water scarcity, we already do things that provide efficiency with this regarding Valley Scheduling, Valley Insights and variable rate irrigation. If you will, more crop for the drop, that comes from that. The second part of this is products that we now offer that do things for things other than a traditional pivot, pump command products and monitoring and control as it relates to flood and drip. Normally, a center pivot guy never mentions the word flood or drip. But in this particular case, we will, because now we have products to offer to help that industry, and we're looking at this more from a total water management solution as opposed to just a traditional center pivot company. The next part is government policy as it relates to our investment in this and how we'd like to be a bigger part of this. In conjunction with the Daugherty Water for Food Institute, we believe there's an opportunity that exists as all the things I've talked about earlier, come to play regarding water security and different countries trying to figure out how to provide food security for their people and opportunities for their people to make a living, and make a decent living, we want to be a part of the early part of the discussion of where this happens, how it happens and the way this goes -- gets done. What policies are put in place by governments. What are good policies and what are policies that are, frankly, going to cause this sort of thing not to happen quickly or not happen at all. We believe we bring something to the party because of our time in this industry and what we know. And we want to be a bigger part of that, and we are going to invest to make sure that, that can happen in a good way. We don't want to just sit around and wait for the next request for quote. That's not -- anybody can do that. We want to be a bigger part of the decision-making and implementing what needs to be done. As we look at innovation through disruptive practices, we're looking at Internet of Things. And one of those is machine diagnostics. And basically, that's just to identify all the things on a machine that can go wrong, monitor them and then send messages through our system to -- that come shows on your iPhone or your iPad regarding, "Hey, I've got a gearbox that's ready to fail. It's overheating. The temp is too high." And the message goes to the dealership and he sends a service truck out to address the problem before it even becomes a problem. That's the direction we're looking for with that. Factory processes and things go with that, the only thing I want to mention there is our high-speed machine. We have a machine now that can develop or make a circle in 1 hour and 45 minutes as opposed to a traditional 4.5 to 6-hour time frame. This is important for 2 reasons. First, sometimes it's for planting and for germination. It's important for carrots, particularly, to do that. Others is potatoes for fumigation that goes with some disease applications. And third, for us as we go forward with Valley Insights, it's putting cameras on the pivot, and being allowed to, in effect, turn your pivot and replace the fact that Valley Insights now operates on imagery from planes. You will now have imagery from the cameras on your own individual pivot. Which brings me to Valley Insights. Valley Insights is very important to us as we look -- go forward, and is a part of our development that happened with our partnership with Prospera prior to our purchase. It's been a successful introduction of this product and is currently on 5 million acres and has been accepted in a very good way. Initially, a lot of skepticism, but the people who have tried it, even the naysayers, even the really tough naysayers have seen what this can do and are impressed. What Valley Insights is about is anomaly detection, an anomaly detection done through imagery and the comparison of images, many, many images over time through the AI that was invented by Prospera to truly root out and identify problems in the field, anomalies in the field as it relates to pest, disease, water application or other agronomic issues, point out what it is and then also have the ability then to treat what those issues are before they become yield events, ergo, the farmer makes more money. And at that point in time, everyone is really happy about what comes with that. It all rolls into reoccurring revenue, whether it's Valley Insights, our scheduling product, everything that goes with this, it's the issue of reoccurring revenue and subscriptions. In the old days, we sold hardware. People had to make capital decisions at time. And capital decisions are tougher to do as opposed to ongoing operating expenses, of which a subscription will be. It's good for the grower, it's good for us, and there's great returns on a reoccurring revenue business. Which brings me back to the beginning. And the important part of this, hopefully, I've hit on those, and you can understand what those are about. The significance is the fourth one down, which is about the autonomous crop management, AI and machine learning, which is encapsulated in our recent purchase of Prospera. What will come out of this now ownership and going forward in this separate business unit that we've created regarding technology is significant and important to us, and I look forward to what will come out of this. On top of this is the performance of this business will remain strong. We continue to invest. We aren't looking to have this business detour, fall in its performance. We're looking to expand as we grow this business, get better returns and even better return on invested capital. That is our goal, and that is how we're measured. There's an old saying that goes with this, that you can either lead, follow or get the hell out of the way. I believe or I hope through the presentation that I'm giving you today, you understand where I think we are, and I know we are in terms of leading this particular area and innovation that goes with the autonomous crop management. As you can see by the color of my hair, this isn't my first rodeo. I've been around a while. I may not be here for all the benefits that come from this. But I may not be as an employee, but I will be here as a shareholder. And I'm excited about everything that this particular business unit has to offer as we grow in this ag space. With that, I thank you, and I'd like to introduce Aaron Schapper, our Executive Vice President of Infrastructure, and thank you for your attention.

Thanks, Lennie. My name is Aaron Schapper. I have worked at Valmont for 9 years now. And for the first 6 years, I had the honor of working with Lennie Adams. I was the VP GM of International Irrigation. And then after that took on the Engineering group as well. About 4 years ago, I moved over to be the Group President of the Utility Structures division. And last year, I've been the Executive Vice President of Infrastructure. So today, I want to talk to you a little bit about our infrastructure businesses and kind of give you an overview of the businesses and the way that we think about the infrastructure businesses. So first of all, one of the messages, I want to talk about simplifying the businesses and really managing our infrastructure portfolio with a greater focus on those high-growth and high-return on invested capital opportunities. I'll also talk a little bit about our infrastructure and how we leverage the key partnerships to turn our dumb infrastructure into smart infrastructure and really kind of the next steps as we move into both smart grid and smart cities. And third, I'd like to talk to you about the size, the scope and the scale of Valmont and how critically important that is. Our global footprint and our strong market position is critical to our success and continued success moving forward. Valmont. As Steve mentioned, we are celebrating our 75th anniversary this year. And with that 75 years of experience, our strong deep customer relationships, our strong engineering capabilities is critical in infrastructure. Infrastructure is the very foundation of economic development. And if you don't have a deep understanding of what customers need and the know-how of how to do it right. 75 years of working with our engineering groups and working with our customers has been critical at Valmont's success. And once again, scope and footprint, we can do things that no one else can. I'd like to talk a little bit about a case study and from one of our customers themselves, Entergy. Now last year, Hurricane Laura decimated the region with over 600,000 people without power. It was a pretty unprecedented storm for that time there with wind speeds of over 150 miles an hour. Now Entergy immediately reached out to Valmont to help with their recovery efforts. And we were able to get 270 structures delivered in 2 weeks. That is a scale that no one else brings in infrastructure or in the industry to get people back up and running on their power. And in addition, you'll see in the picture below that going over the bay is our PyraMAX structures that saw winds of over 150 miles an hour and with 0 problems. And that scale, that responsiveness, that deep understanding is critical. And I'd like to go to the next slide and play a video from our customer Entergy. [Presentation] So when we look into the future and we look into future market demand, the markets and infrastructure are strong. We look at between utility, lighting and transportation and telecommunications, you'll see good growth rates. These strong markets are helping to drive our future growth. Really critical changes are happening right now, both in renewable generation and vehicle electrification. As the acceleration of electrical vehicles hits the market, there will be a huge need for additional electric infrastructure to help support that growth. So as Steve mentioned, when we look at our strategy for long-term growth, there really are 3 pillars. So these 3 pillars I'll touch with in the next few slides on how we use these 3 pillars to drive the business forward: First of all, driving operational excellence is critical. The last few years, you have heard from a lot of us on manufacturing lean and how critical that is to our business. I'd also like to talk to you about what we're doing administrative lean. The other side of manufacturing lean is critical and really working on our infrastructure businesses to bring one operating system, to enable all the infrastructure businesses to be doing things the same way with standard work. Tim will talk to you a lot about digital customer experiences and Diane later will talk about improving platform design. These are all critical administrative lean principles that we'll be bringing to the organization. And then finally, ESG focus. Conserving resources and improving life has not been -- is a 20-year-old tagline for Valmont. We've been using that for 20 years. ESG is not new to us. The ESG focus is not new to us. Everything we're doing on the infrastructure side is bringing those ESG principles to bear. The renewables, the growing solar businesses and the electrification of vehicles in the grids are just examples of how we're bringing ESG into the marketplace. Finally, the strategic market expansion. When we look at this pillar, I wanted to emphasize really the portfolio management side of this business and infrastructure, grow those high return on invested capital businesses. As we look at the portfolio, there will be high performers and there will be low performers. Focus on low performers, fixing those low performers or divesting, if necessary. And finally, price leadership. In our business, there is always going to be inflationary and deflationary cycles. It is critically important you know how to deal with those cycles and you know how to get ahead of them on pricing. Pricing leadership is important in everything we do to manage through those cycles. Later on, you're going to hear a lot from both Tim, Chris and Joe about what they're going to be doing on their strategic market expansions. There's a lot of interesting opportunities for us in the future, and we're well positioned to capture those expanding opportunities. I want to spend a few minutes to talk about the road map. What's unique about Valmont, very different in the Valmont experience is our infrastructure footprint where we are today. So if you look out in North America at both the transmission side, on the utility businesses and in the light pole size, almost 50% of those poles are made by Valmont. We have a very established position in the market and very established beachheads in the streets. Everywhere you look as you drive down the road, Valmont is there somewhere. Really, as we look at the next step is what we're calling the digital gateway. We are uniquely positioned to take those -- the existing structures and move them into a digital gateway, so that we can bring smart city and we can bring smart grids, power the centers of the future and able to integrate those back with the needs of the city or the grid operator. So we look at these integrated projects of the future. You'll see Valmont infrastructure playing a central role in being the gateway to bring that information, that power to the center and the center back to the cities, and we're grid operators. And that we'll be working with leading world-class technology producers to bring those 2 realities for all the cities and all the grids around the world. So finally, I'd like to talk a little bit about innovation and innovation through disruption. You hear a lot about smart cities. It certainly is a new idea. It's really the Valmont role and how we're going to bring that gateway to smart cities is what's critical. We -- you're going to hear a little -- more about -- from Tim on the lighting structures, and you're going to hear about Chris' efforts on what he's going to be working on smart grids. And finally, you're going to hear about Joe's efforts on how 5G and telecom have really changed the game and that focus on this new technology that will improve life is critical. And so to wrap up, really stressing the portfolio of the business, to making sure that we simplify the business and we put the capital into the high-growth, high-return on invested capital opportunities, working with our key technology partners to push the dumb infrastructure to smart infrastructure. And then finally, continuing to use our deep customer relationships, our deep customer knowledge and our footprint to drive our business. I appreciate your time today, and now I'd like to invite Chris Colwell to come up and speak about our Utility business.

Thank you, Aaron. Good morning, everyone, and thank you for joining us. My name is Chris Colwell. I'm Group President for our Global Utility segment. As background, I joined Valmont approximately 10 years ago and have been focused exclusively on the electric utility market over this time. Prior to joining Valmont, I spent 20 years in the irrigation industry where I had various leadership roles, including P&L responsibilities. Joining me today is Greg Turi, Vice President and General Manager of our Global Generation business. This morning, I will provide a high-level view of our overall Utility business and will then turn the presentation over to Greg to update you on our solar business. We appreciate the opportunity to provide you with an overview this morning. In our update this morning, we want you to take away several key messages: First, our market is very strong and has significant growth potential looking forward. Driving this is investment in renewable generation and the need for a reliable electric grid; second, our differentiated products, services, engineering expertise and manufacturing capabilities uniquely position us to take advantage of these strong market drivers; third, our long-standing customer relationships will enable us to be successful; and fourth, we've made and continue to make significant investments in technology and strategic acquisitions to grow our business. We'll talk about all of these things over the next few minutes. Global utility is $1 billion segment of Valmont Industries. Manufactured in 19 dedicated facilities around the world, the majority of our sales come from North America. We serve our industry with a complete product offering. These products create the infrastructure that moves electricity from the generation source all the way to the end user. Of note, our products are produced using multiple material types. This is a competitive advantage, enabling us to provide optimized solutions to meet our customer-specific project needs. This will be illustrated in upcoming slides. We have 14 manufacturing facilities in North America and another 5 international locations. We also share facilities with our ESS sister division when we need additional capacity and site capabilities align. This footprint positions us for global growth opportunities and cost advantages. Our scale and footprint allow us to strategically utilize production locations around the world to optimize competitive position and profitability. Our scale also provides us with flexibility and the ability to mitigate project risk for our customers. From a manufacturing perspective, we're able to leverage best practices such as welding standards, cost-reduction initiatives and manufacturing innovations. From an engineering perspective, we leverage global engineering by engaging utility engineers from the U.S., Mexico, China and India 24 hours a day through the use of common tools and standards. Diane Larkin will discuss our operational transformation in detail later this morning. At the heart of Valmont's competitive advantage is our brand and reputation. Our customers know and trust us. Our exceptional performance has been proven by the thousands of projects executed over the years. This trust has been built over time and is impossible to replicate by other competitors in our market. Core to this trust is our engineering expertise and leadership. Our customers look to Valmont engineering for unbiased support. Deep relationships exist between our engineering teams. In many cases, these people have worked together as a team for decades. These relationships minimize the impact of the traditional procurement function. Looking at our market, we have strong market drivers that will remain in place for the next many years. One key driver is society's need for renewable energy. Investment in renewable generation is increasing dramatically. Renewables will account for approximately 42% of all generation by the year 2050, with the majority of this growth coming from solar generation. In a few minutes, Greg will talk more about this. Of note, this investment is increasingly impacting the overall transmission market. Renewable goals are not possible without significant investment in transmission, distribution and substation as this new generation must be tied into the larger electrical grid. Currently, approximately 1/3 of all transmission investment is driven from renewable generation. Reliable electricity is critical for everyone. Catastrophic weather events such as hurricanes, tornadoes, ice storms or fires continue to increase in both size and frequency. Mitigating this risk is critical to utility customers. Reliability is also impacted by an aging electrical infrastructure. The majority of North America's transmission and distribution lines were built in the 1950s and 1960s with life expectancy of about 50 years. These lines were not originally engineered to meet current reliability demands. Today, initiatives to ensure grid reliability drive approximately 60% of segment investment in TD&S. Valmont has a long track record in supporting large projects and responding to emergency outages. As highlighted by the customer testimonial Aaron displayed in his overview earlier, our manufacturing capacity, flexibility and footprint enables immediate response. Additionally, we have pre-existing designs, standard structures and safety inventory with many of our customers. We see growth opportunities in all of our existing product categories. New products and services will expand our current addressable market. Valmont Utility will outperform the market. We project annual growth of over 8% annually over the next several years. So how will we do this? Our strategy for long-term profitable growth is disruptive innovation. Innovation is our path to profitable growth. Technology is a key element of this focus, enabling us to add value beyond the current industry model. Disruptive innovation will enable us to change the game and shift value-add towards Valmont. The foundation for this is operational excellence. We are committed to take our business to the next level through our people and core values. Our culture is based on ESG principles, and our utility team believes this is key to our success. Our core product line consists of support structures for the TD&S, solar and wind markets. Our focus here is to provide innovative solutions to customer problems while reducing total installed costs. Note that our focus is on reducing total installed costs, not just the cost of the structures but rather the total project cost such as the amount of land necessary for the line, foundation costs and construction assembly costs. The objective of this is to disrupt the current value chain. We want to shift a portion of the value and growth opportunities to Valmont. Our vision extends to next integrate technology into these products to add value beyond the current industry model. By adding remote condition monitoring systems to our structures, we will create a connected smart grid. This digital gateway will not only provide our customers with the operational status of the field structures, but the data we capture will also allow us to find better ways for product design, thus fueling our innovation engine. Services that make our customers' lives easier, further add value and entrench us. The goal is to become indispensable. Examples include packaging of complex substations, vendor-managed inventory utilizing GPS technology, drone inspection services utilizing artificial intelligence to identify opportunities not previously possible and drone commercial applications, such as cleaning key components on our transmission line. Finally, the vision brings all of these elements together into a bundled total solution that no one else in the world can provide. The enabler for our product vision is our strong customer relationships. This competitive advantage positions us for successful implementation of our innovation road map. Having close working relationships with industry-leading utilities, transmission companies and EPCs, we're able to have immediate conversations with the right people to make the vision reality. Next, I want to show you several examples of our disruptive innovation in practice. Here, you see an example of a family of transmission structures we've developed. Our design approach focuses on ease of constructability and reducing total installed costs. This design incorporates the use of adjustable cross braces, significantly easier to assemble and thus reduces the cost of construction. Additionally, this structure has significantly smaller foundation requirements, not only reducing foundation costs but also making the structures more environmentally friendly. We disrupt the existing model, reducing construction and foundation costs so that we can shift a part of the value chain to Valmont. We then price for this added value. These next pictures are of a prefabricated substation product. Substations are extremely complex. From a customer's perspective, they must purchase all of the pieces and parts separately. From a construction perspective, these components must be assembled to high tolerances in the field, oftentimes in adverse weather conditions. A typical substation may take up to 6 weeks to assemble in the field. Our solution reduces this to about 2 days. We fabricate the substation in our factory in a controlled environment and then deliver to the job site turnkey. This not only reduces construction costs but also improves quality. Again, we disrupt the existing model by significantly reducing construction costs and making our customers' procurement teams' lives easier. We shift a part of the value chain to Valmont and price for this added value. Finally, these are pictures of distribution poles using alternate materials to wood. Wood poles make up the vast majority of the distribution market, cheap and short lead times. However, they fall down in hurricanes and they burn in fires. Our approach is to innovate and disrupt. The left-hand picture is of our spun concrete distribution product. This product is extremely durable in hurricane-prone coastal regions as compared to wood. It's also more resistant to saltwater as compared to steel. This product addresses the need for hardening to ensure system reliability. On the right hand is a picture of our composite distribution product. This material performs significantly better in fire-prone regions as compared to wood. Additionally, these structures do not conduct electricity as compared to steel. By addressing our customers' needs, we disrupt the wood stronghold on the market, change the value position and price for the added value. Note that all of these products have multiple patents on both process and product functionality. We're aggressive in protecting our intellectual property. On the next 2 slides, we'll provide a view of our drone services business. We use the same approach with all of our services, solve problems and disrupt existing business models. This is an example of one of our drones deploying condition monitoring sensors to one of our transmission structures. These devices can be attached at the time of shipment or after installation using a proprietary magnetic connection deployable by drone. Monitoring various environmental and structural inputs, each sensor then provides data back to the cloud for analysis. This disrupts both traditional structure manufacturers as well as third-party inspection companies. It also provides Valmont with invaluable data for future design modifications while entrenching us with our customers. We've aggressively assumed a leadership position in our industry with our drone technology and innovative pilot certification program. We've been invited to sit on the advisory board for both Embry-Riddle Aeronautical University and the National Association of Corrosion Engineers. On the next slide is a case study of one of our recent drone projects. As a course of normal business, this customer wanted to inspect a line and conduct routine maintenance as needed. The use of physical inspections using a bucket truck is the industry-standard approach. We recommended the use of drones and technology is a better solution. Using proprietary artificial intelligence, we flew the lines to identify potential issues much faster and with greater accuracy. We also used our drones to power wash conductors needing routine cleaning and to fix areas of potential corrosion that were previously unknown. The results were impressive. We reduced inspection cost by 65%, time to completion by 50% and head count by 75%. Additionally, both job safety and environmental impact were significantly improved. Finally, our drone technology enabled inspections to be conducted while the system was energized, allowing our customer to avoid system outages and the associated loss of revenue. We are aggressively driving operational excellence within our technical team. Using administrative lean, we've implemented a digital kanban system for engineering to reduce cycle times and improve productivity. Driving the One Valmont objective, we are sharing common tools and standards to leverage global engineering resource to design 24 hours a day. We're driving standard -- product standardization and platform design to improve both manufacturing and engineering efficiencies. All of these actions free up resource to reallocate towards innovation. We've been able to reallocate over 10 head count this year towards innovation as a result. From an ESG perspective, virtually every project Valmont Utility delivers supports this objective. Renewable generation is an obvious environmental improvement. Transmission is required for renewable generation to be successful. A resilient grid improves lives around the world, and our smart grid will enable further system optimization. We live ESG long before it was popular, having used the tagline Conserving Resources, Improving Life and helping power the world for many years. These aren't just words for Valmont but a way of life. Our areas of strategic focus align to growing our business profitably. We're focused on exceeding customer expectations by helping them to solve problems, expanding our markets through disruptive innovation, integrating technology into our business, aggressively driving price for the value that we bring, leveraging all areas of our business to maximize our results and focusing our efforts towards those things that maximize our return on invested capital. I'll now turn the presentation over to Greg Turi, and he'll update you on our solar business.

Thanks, Chris. Hi. My name is Greg Turi, and I'm Vice President of Global Generation. I'll start with a brief introduction. I've been with Valmont since 2011, and I've spent my time in the Utility division in multiple commercial and operational leadership roles. In 2018, I was asked to move over and support our international business and that evolved into a global focus on our Generation segment, which includes wind and what I'm excited to be here to talk to you about today, our solar tracker business. The outlook for solar energy is extremely strong. In addition to the strong market, we have a product technology driver that's gaining tailwinds for this business. Traditional structures in the ground-mounted solar space are fixed, which means they hold the panel at a fixed angle to the sun. Our product moves this -- the panel in relation to the sun, providing 25% additional output for just 10% of the cost. And as you can see, the growth rates in solar trackers and the forecasted growth rates are very strong, and we feel we're well positioned to exceed that rate. Now this business has traditionally been driven by North America. However, today and in the future, it will be a global business. As our competitors look at growth plans focused on international expansion, we're already there. Our product has been installed in every major region in the world, including Africa, Asia and the Middle East. We have commercial and operational offices in Latin America, Europe and the United States. Our first product was installed in 2007. And while there have been many new entrants, our product track record in this space is unparalleled. We have a dual product portfolio, which means we have a tracker and control software for multiple applications, and we're supporting those applications both in large grid-connected utility-scale solutions and community-driven distributed generation solutions. With that, we feel we have a strong diversified platform by which to grow this business. Although there's a lot of technology in this space, 50% of the cost of a tracker is steel. And as our competitors look to form relationships within the steel industry and to learn how to manage variable costs with their customers, we've had those relationships, and we've been managing variable steel prices with our customers for decades. So what does this mean? It means we can take a broad market approach. Our teams are working with our customers on utility-scale projects up to 400 megawatts. At the same time, we're working with our customers on small projects, 1 megawatt of distributed generation. And it's the expertise of Valmont's business platforms that allow us to do that, and we're doing it in a balanced way. Our regions across the globe are all contributing to the portfolio, and we expect that each would contribute at least 20% with all contributing no more than 50%. So as we look at this and how we're positioned in the served market perspective, we feel we have the strongest served market in the industry. I'd like to tell you about a case study that I think demonstrates these benefits in our business. We had a strong customer in Europe who asked us to do a 382-megawatt project in Chile. They asked for a custom tracker using a bifacial module. That module is a 2-sided module to increase energy production. And they asked us to do it on a very large scale, on a project site that was over 2,800 acres. We engaged our agile engineering approach to develop and validate a custom tracker to meet their needs. We engaged our global supply chain and our global project management resources to support the project, delivering components from 3 continents to the project site. The end result for the customer was we designed them a custom 2x28 panel string product that met their needs and was able to get the energy production they were looking for. When they asked us to accelerate the schedule, we were able to do so, delivering over 19,000 tons of steel ahead of our contractual commitments. This project was executed in a COVID environment. And when international borders closed, we used Valmont's network of resources to ensure site services continued. This is a large project with a difficult scope as represented by Project Management Institute, naming it 1 of the top 50 influential projects in all industries. It was named #4 in energy and #1 in solar. We're proud of our support of this project, and we think it represents strongly how we can use product innovation in a project environment with our global supply and regional execution to support the needs of our customers. Following along the lines of Steve's comment on technology in our products, we have a lot of technology paths within the tracker space, and I'd like to talk to you about one of those today. We recently launched our TRJ-AI control software. Now this software allows us to remotely monitor the performance of the trackers and make modifications as needed. Most importantly, it allows us to monitor site conditions and use machine learning to change the performance of the tracker as needed. And what does this allow us to do? It increases energy production, lowers overall cost of energy and allows us to mitigate severe weather risks, which are a significant issue in the solar industry today. From a plant operations perspective, it lowers O&M costs through preventative maintenance, reduces downtime and leads to an easier, better customer experience. This is one example as we're focusing our technology on our customer needs and driving innovation in the industry. On the market side, we are already leveraging our utility relationships in this business. We have several projects ongoing with current utility customers, and we're in discussions about additional business models that can provide value, including product bundling, where we would provide the structures for solar, substation and interconnections under one agreement. Lennie spoke earlier about how irrigation is using solar solutions in their business. And as we look at agrivoltaics, which is the build-out of dual use for solar and agriculture, it's an emerging market. And we feel with our position in both agriculture and solar, we're well positioned to be a leader in this space. But across the business, we have strong customer relationships with high energy use customers, and as we build out those business models, there will be additional opportunity for us to add value. Now on the supply side, we are -- we've been called a class of one. We are the only vertically integrated supplier of trackers. From a steel perspective, we already talked about the expertise and leverage that we have. And as we look at global expansion, there are many more opportunities for us to leverage the spend and the expertise to add value to our customers. From an operational perspective, we have factories in 22 countries. And in those factories, we have tube mills and roll forming lines. These are 2 of the core production processes in building the tracker. And as we build that out, not only will we add value to our solar business, but there'll be incremental return on invested capital to those assets. From a facilities perspective, the same facilities we just discussed, allow us to have a global distribution network. And while our competitors are placing purchase orders and asking them to direct-ship to their project sites, we'll be able to manage our materials through our own sites, which add new business models and new value through our -- to our customers. As we look forward at this business, we feel we have unique value creation opportunities both on the market side and on the supply side. With that, I'd like to thank you for your time, and I'll hand it back to Chris.

Thanks, Greg. So to wrap up our utility section, our goal was to leave you with these key points: First, we have a strong market and are very excited about the future. We're well positioned to take advantage of these opportunities. No competitor in the world has the capabilities we have. We have strong relationships with our customers, enabling us to successfully introduce innovation to the marketplace. And finally, we're committed to investing in innovation to secure our future and grow our business. Thank you all for your time this morning. I'll now turn the presentation back to Renee for questions and answers.

Thank you, Chris. So let's go ahead and get started with our first Q&A session. A reminder that you can submit your questions on the video platform in the Q&A box that should be to the right side of your screen, and you can also e-mail questions to [email protected]. So for this session, we will focus on the first group of presenters, and then we'll leave questions for the later presenters until the second Q&A session. So our first question is going to be for Steve, and this is from Brent Thielman with D.A. Davidson. Steve, you talked a bit about Prospera in your part of the presentation. Any targets that you can share for recurring revenue in the Irrigation business over the 3- to 5-year target range? And with Prospera, where do you seek to take that?

Sure. Thanks for the question, Brent. As we've been working on technology sales over the past few years, we were already seeing growth rates approaching 20% during the lull. Our technology sales are broken out between recurring revenue and, let's say, hardware type of products, with about half of that being recurring revenue. As we move forward with Prospera, all of that is a recurring revenue model. And therefore, you will see growth rates, as we talked about, of around 40%. And so we expect that with an upmarket in agriculture, the high adoption rate for in-season data, we would expect around 40% growth in the recurring revenue over the next 3 to 5 years compounded.

Great. Maybe this is a good shift over to you, Lennie. I'm going to ask you a question that we got that came in related to farmers' adoption of technology. Do you see any headwinds when it comes to the adoption?

Well, frankly, at this point in time, no, I don't. With net farm income, where it's at and with the issue of the more innovation and technology that comes into the market, and once people start to accept even the late adopters, once you start to have this, you want more. And it continues to just push forward and push forward to whereas, I guess to even people who were naysayers, if you will, about technology and the sort of thing going forward. The more you see it, the more you have it, the more you want. And so no, I don't see this slowing at all. And as you saw in my presentation, we believe this particular part of the business can grow 40% per year going forward. So no, I don't see an issue to this in this time frame.

Steve, maybe shifting back over to you. I've got a question here from Nathan Jones at Stifel regarding talent development. So on internal talent development, do you have any kind of a target of positions that are filled internally versus externally? Or anything that you might want to comment around how we approach that?

Sure. Our talent philosophy has always been to try and promote within around people that demonstrate those 4 core values that I talked about earlier. But when we have to, for specific skills, and as an example, in Greg's area with solar, there are times that we have to go outside to get the expertise around a given part of our business. In the drone business, there's talent we had to search out there as well. So we've brought in some select skills-based types of positions that require us to go to the outside, but our preference always is to do the majority of our promotions and hiring from inside the company as they understand the value proposition that we bring forth and have that passion that I talked about earlier in satisfying the customer.

Great. Thank you. Aaron, maybe shifting over to you. You touched a little bit on lighting and traffic growth potential. There's a question that came in about lighting and traffic or transportation revenues have seen negative growth rate over the past 12 months. Could you describe the environment that has made growth challenging? And a little bit about the outlook over the next year and if it's possible without an infrastructure bill?

Yes. So thanks for the question. First of all, on the L&T side, the last 12 months, COVID has had a big impact on that business. As you look at both state tax revenues and then municipal revenues, I mean, those will have a big effect on that L&T, in particular, that side of the business. Going forward, obviously, we're a lot more optimistic, especially as the situation for COVID stabilizes as vaccines roll out and cities get back to normal business. We're a lot more optimistic about it. In regards to the infrastructure bill, our outlook now does not take the infrastructure bill into account, so any additional infrastructure bill would be additional tailwinds that, obviously, would help this business a great deal. Right now, with the FAST Act approval, and that does help, and that has already been approved and is moving through. So we'll look to see what the infrastructure bill brings. But right now, we don't count on that for our business, but we're still looking forward to some good recovery in the year ahead.

Thank you. Chris, shifting over to utility. After the wildfires last summer, some state regulators spoke of the challenges of justifying the replacement of wood poles with steel and concrete. Have you experienced any pushback similar to this?

Okay. Thanks, Renee, and thanks for the question. The short answer is no, we haven't received any pushback at all. The electrical grid infrastructure is critical just to pass the electricity across the West Coast. So with the current situation with the fires, the first priority is to make sure electricity continues to travel. So the need to harden the grid is there. There's an incredible amount of infrastructure that needs to be replaced or upgraded or hardened, particularly in that region. And so this is going to be a driver for our market for many years to come. It's going to take a long time to replace all of these poles. I think there's still going to be a place for wood. There's always a place for that type of low-cost product in the marketplace, but I think what we're going to see is the shift towards these hardening types of products that do cost a little bit more, but the value that they bring is much higher than the risk associated with outages.

Right. Steve, circling back to Prospera. This is a question from Jon Braatz at Kansas City Capital. Can you talk a little bit more about Prospera's opportunities beyond pivot irrigation?

Sure. Obviously, the pivot, we believe, is the single best way to do the closed-loop AI with in-season adjustments. That said, we are looking at Prospera to be more than just under-irrigated acres. And we've seen a tremendous amount of excitement in the market related to seed manufacturers, to OEM equipment manufacturers, to the drip market. So we are going to look beyond our traditional served acres for the Prospera model going forward and believe that there are good possibilities there as well.

Greg, I have a solar question that's come in from Chris Moore at CJS. Can you give us a little bit more color or detail on North America solar with large megawatt projects and how that's progressing in that market?

Sure. Well, thanks for the question. As you know, North America market is something that we've been working on penetrating since our acquisition in 2018. And we're really pleased with the progress that we've made there. 2020 was our first year of full activity in that market, and we've had several projects both with new customers and with existing customers. And most of those were in the distributed generation space where you have to kind of prove yourself in this market before you get an opportunity to look at some of those larger projects. We've now done that, and we have a very active pipeline with our existing customers and with new customers on large megawatt projects, and we expect good results in the future.

Great. Maybe as a follow-up to that question, with so many new players entering the market for trackers, do you see any further market consolidation in the U.S. market taking place?

Well, I think it's a changing market. And if you look at where the traditional players have been over the last few years, they've gone through growth spurts in relation to how the market has grown. But I think the customer expectations are changing as well. This is now less about a project and more about being able to support an industry. And I think as that continues to evolve, the participants in the market will continue to evolve. Customers' expectations will continue to evolve. We think that bears really well for us. I think it's going to be more about supply and being able to be consistent, and it's something that we've built our businesses around. So as that changes, certainly, there's opportunity for consolidation. And I think that trend may continue.

Great. Aaron, what is the opportunity for the digital gateway for smart cities and smart grids? And what are the barriers to entry for potential competitors in your view?

Well, good question. So the digital gateway, when we talk about the digital gateway, really, it is the entrance into smart cities. Now there's a lot of talk in the industry, and there has been for some time about what smart city is, what it means to people and what it's going to do in the future to municipalities. Every municipality kind of has its own goals and its own needs. Some of them may be safety. Some of them may be environmental. Some of them may be traffic. Each municipality kind of decides what they need. So we're not wrapped around the sensor or the tools. There's a lot of those out there. What we're really focusing on is bringing those sensors and tools to the market. So because of our infrastructure footprint, we're really focusing on the gateway, and we call it a technical stack that basically is enabling our infrastructure to be that communication for that sensors and that sensor information back to the customers. So we really focus on the gateway part of that. And that's the part where Valmont can really bring value. We have the footprint. As I mentioned before, we have the -- our infrastructure is everywhere you look, and it's really just taking that infrastructure and bringing it back and equipping it with the smart sensors that each municipality will need in order to bring the data back for them to use. And that's where smart city is going to really change. And every municipality will have different goals. So it's very important to have the infrastructure of the electronics and then partner with the sensors and the software that each of the cities need.

Excellent. Chris, I'm going to throw another question over to you. When do you expect to recognize more revenue from services? You talked about drones and the ways that we are expanding our market with those services. And kind of where do you see the recurring revenue from services going for your segment?

Great question. Thanks. First of all, what I would say is we're already seeing a significant financial benefit from the services part of our business. It's already impacting the bottom line. We're just getting started, and I think there's a huge future as we look forward. Over the course of the next 3 to 5 years, we will see the drone business as a revenue generator significantly increase at a higher rate than our base business. What we do see today is a large number of basically requests for quotation, requests for this type of service to be offered to our customers. So right now, we have a lot of momentum. We're already seeing the benefits of that momentum coming in financially. And as we look forward, it's only going to grow.

Great. Steve, I've got another Prospera question. This one is from Jon Braatz at Kansas City Capital. How do you define success in assessing Prospera's technology? For example, we're on 5 million acres now. Where would you like to see this go in the next 2 to 3 years?

Yes, there's a number of different ways to evaluate a recurring revenue business. First and foremost, we talked about engaged acres. This was just getting the technology to analyze the acres that are out there. That will be a metric we'll look at, continued going forward, but ultimately, it comes down to paid farms or paid fields. And right now, we have about 5,300 paid fields utilizing the Prospera technology. It's growing rapidly. So that will be something we will continue to report on as we go forward. And then ultimately, too, it could be a model of different types of services. We would expect to have some basic level services, which is basic engagement, to more of a premium type of service. And so those are things, too, that we'll look for as we go forward. It will vary, whether it's under an irrigated pivot where we can collect a lot more data or if it's something we're doing with a drone or a plane or a satellite for the image capture. So those will be some of the primary metrics that we have going forward.

Okay. This next question is from Brent Thielman at D.A. Davidson, and it's really for any of you or all of you. His question is, "Do any of the business unit leaders see risk of customer delays due to substantially higher prices for steel and other inputs?" So Chris, do you want to take...

I'll take a start on that one and then if anybody has anything to add. So at this point in time, we have seen very few, if any, projects pushing because of the cost of steel increases. This is part of our business. It's not something new. I think the rate of change is steeper than normal, but steel ebbs and flows over time. And so what we're seeing is the marketplace understands the situation. The projects still need to be completed. And the fact of the matter is for steel structures, which is what we supply, it's a relatively low percentage of the total project cost. We typically represent about 15% of that project cost. So the steel component that increases is, in the grand scheme of things, a very small part of the overall project cost. So we really haven't seen any movement in our projects, and I don't expect anything of significance.

Okay. Lennie, do you want to make some comments?

Yes, on the irrigation side of things, similar. Frankly, I have seen none of that at this point in time. Again, once you make a decision to go this route or make this investment, it's something you need, it's a development opportunity, replacement opportunity, that sort of thing. And the bigger issue for us has been being able to supply, the supply chain interruptions that go with this. But again, that's just a delivery issue on our part. People want the product. They want to get it in their fields. They want to use what the irrigation machine can do for them. And while steel is a major component of it and copper and some other items, and pricing has gone up, it's not like it's off the charts or doesn't make sense for the investment at all. In fact, what we're seeing is the perception that increases are happening and going to happen. And so orders are being placed to beat an increase which just tells me, again, there isn't a number right now that this is at where someone is going to go, "Well, that's just too much for what this is going to do." So no, we're not seeing it this time.

Thank you. Okay. Greg, I've got another question for you from Jon Braatz at Kansas City Capital. Can you talk a little bit about how bidding activity in North America on utility-scale projects has been going and what you're seeing, some of the trends there?

Sure. Yes. The bidding activity on utility scale in North America has been strong and continues to be strong. Now there's a seasonality aspect of this. And so right now is a very active time for bids on utility scale. We're continuing to see those come in, and our pipeline is very robust. So at this point, we've seen really no noticeable change. It's a strong market. There's a lot of activity, and we see that continuing.

Maybe as a follow-on from another question, related. Thinking about the mix today of U.S. versus international for our solar business, obviously, a lot of opportunity across the globe in all markets. But how do you see that mix evolving over time?

Sure. Well, our view of this is we have a global business, and we're well established globally. We're taking a balanced approach and we discussed that in the presentation both from a geographical perspective and also from an application perspective between distributed generation and utility scale. So we have an active utility-scale pipeline and have completed projects both in Latin America and in EMEA. We've added a robust distributed generation platform in both of those areas. So as we look forward, there's opportunities in all regions. We're fortunate that our home European market, which is Italy, is extremely active right now. So there's a lot of opportunity there. And we're doing a lot of work in Brazil, which is also quite active. So the discussion we had about a balanced approach, we expect that to continue. Now it is a project-based business, so in any given year, one project can drive a specific region up or down, but overall, year-over-year, we expect it to be pretty consistent globally.

Great. Steve, coming back to you, looking at your leadership slide. I noticed that there's no head of business development. So given that M&A is a large part of our strategy, do you have a specific team dedicated to business development or anything more you can kind of share about the approach that we take on M&A?

Sure. Over the past few years, we have really worked to pull certain types of functions out of the businesses, put them into the shared services area. We've moved to consolidate operations under Diane and the operations area. And that really frees up this team that you see right here as well as the presenters a little bit later to focus on that business development. We don't want someone from corporate pushing something onto the business that may or may not really be a part of the strategy, that may or may not be able to be resourced properly. So we want the business leaders themselves to identify, cultivate and move the opportunities through the pipeline. Now we do have a business development team at corporate that will assist the segments to make sure we're following standard process and strong due diligence principles. But in general, we don't want just one business -- or one head of business development to think for all of the segments. They can do that on their own, and they now have the time and the focus to do that based on our organizational structure.

Lennie, a question for you. Can you provide an update on the Egypt project? Is execution going as planned, everything on track, any concerns around timing or progress?

Yes. To this point, the project has gone well. We are where we want to be. The customer is satisfied. We continue to be able to -- we haven't had the supply chain disruptions affect us near as much on that side of this business, but it has to a degree, but we've overcome those. And right now, we're in a -- we're right where we want to be relating to this project and as it will ship or invoice over this year and into next year. But to this point, I'm very pleased with how this project has come to fruition to this point.

Great. Steve, I've got a question from Brian Drab at William Blair asking about our 12% operating margin target that you mentioned in your presentation. Do you think that achieving that target could maybe come sooner as we catch up with steel prices, given our strong end markets?

Yes. Right now, the steel and the material inflation has not yet abated. And so the further we get into the year and knowing that we book backlog, let's say, in the utility business maybe even 6 months in advance, that would be kind of a headwind to the 12%. We're seeing irrigation and coatings and other parts of the business like telecom really perform well. But I think the reason we laid it out as a 3- to 5-year goal is it will take some time and it could be sooner if things stabilize, but it takes some time to get that through backlog and some of our operational excellence metrics that are part of that target also take time to deliver because, in some cases, it may be capital equipment, new training, things of that nature. But overall, we're progressing well against the target and why we feel confident in that despite some reinvestment as necessary from an SG&A perspective to capture growth. We feel we're tracking very well to that goal and, within the 3- to 5-year period, feel very confident.

Excellent. Aaron, shifting back over to you. You mentioned that you are focused on simplifying the business, one of the ways being portfolio management. Can you kind of provide a little bit more color on what you mean by that?

Yes. I think Steve got -- put some guidelines out on our 3- to 5-year goals. And so as we look at that portfolio, there will be some businesses that fall below those goals. And there are some businesses that are close. And so we really want to focus to make sure that each of the businesses in the portfolio really qualify and get to those goals. And this really -- the rates that we put forward are the ones that we judge each of our businesses. And so as we look at the portfolio, we'll look at each of those performers and how they're doing and put plans to get them there. So that's the way we look at that portfolio.

Yes. And I would just add to Aaron's answer. We do understand we're in cyclical businesses. And so we're not looking at these as point in time. We're looking at in the future, can we beat our cost of capital and do we have momentum with our initiatives to get there. If there is something in the market that prevents us from doing that, and that may be scale, it may be the ability to pass along price, then those are some of the filters that we want to look at to determine whether or not to stay in the business. But short term, we understand that there's always cycles with our businesses. And if we were to get rid of every business that has gone through a down cycle, we wouldn't have any. So this is more about how we perceive over time the opportunity for that business, particularly in the markets that it serves.

Very good. Sticking with you, Steve. I've got a question from Brent Thielman at D.A. Davidson. Can you talk a little bit about the average investment by a farmer to use the Prospera technology and maybe a little bit around the payback and kind of how it all ties together with our overall technology strategy?

Sure. As compared to the pivot, it's a nominal investment. And what we have had in the past is a combination of a hardware purchase and then a recurring revenue model thereafter. As we look forward, there may be much more that we'll build into the recurring revenue model itself and when a grower, as you saw through some of the testimonials, when they have an issue, their payback is less than a year. So a healthy field, we'll still have a payback in, let's say, 1 to 2 years, but if it can catch something that's vital for that field in a given year, with the cost of our product as well as the recurring revenue, it, again, is a strong payback and has substantial increase. If you look at even some of the current products that are out there with AgSense, if you just get 5 bushels more of corn on your field, you've more than paid for the cost of the product. And so we see substantial increases above and beyond that. And that's why people have been so willing to give the testimonials is these are substantial, $30,000, $25,000 type of savings per field. When our anomaly detection can pick up something, report it back to the grower, and then they can do something about it.

Very good. We have time for one more question. And Steve, I'm actually going to stay on -- stay with you for this one as well. What do you see as the advantages to having Prospera with Valmont as opposed to the partnership, continuing the partnership that we had been for the last 2 years?

Sure. It's all about speed, integration and also the market support. If you do something through a partnership model, and even if it's a strong partnership model because we deliver through Valley dealers and Valley dealers are the one that service it, they talk about it locally with the growers. We have more skin in the game by owning Prospera than we do through a partnership. Some partnerships come and go. So one is, the market perception is we're putting our money where our mouth is, and we want to make sure that this is successful. They know that Valley has been around for 75 years and will support the product. So in technology adoption, that's key. And then just the ability to integrate our product development and service development with the pivot, with the teams will really allow us to go-to-market much quicker and much faster than even in the partnership model. And so that's all the reasons why over our 2.5 years of working together, this became a natural fit for us.

Great. Okay. Well, that wraps up our first Q&A session. We'll be back in about 90 minutes to do another Q&A for about 30 to 35 minutes with the second group of presenters as well as any questions that may come in for the first group, those will be available as well. Thank you. [Break]

Welcome back. My name is Tim Donahue. I'm the group President of the Lighting & Transportation segment. I've been with Valmont for a little over 3 years. I started in our North America Group and took over global responsibilities about 1.5 years ago. Prior to Valmont, I worked in a few industries, but primarily focused on turning around underperforming business units, with a dual focus on creative solutions to grow the top line and digging into operating performance to improve the bottom line, which is exactly where we are with the Lighting & Transportation segment. We've had some great progress over the last 1.5 years, but I'm even more excited about the future. Let's jump into the presentation. So Valmont is recognized as a global leader in the Lighting & Transportation segment based on the quality of our solutions and the breadth of our portfolio. Our focus on operational excellence allows us to more consistently deliver products, meet or exceed customer deadlines and earn a price premium in the marketplace. The breadth and depth of our engineering resources and our perpetual focus on R&D facilitates industry-leading innovation and technology evolution. And lastly, we have abundant opportunity to further penetrate existing markets with new solutions and pursue global expansion. So let me give you a quick snapshot of our product line. We're a little under $800 million in revenues. We operate in 20 countries around the globe, with 35 manufacturing facilities and around 3,200 employees. I wanted to give you some examples of our product portfolio just for context. So when we say transportation, here are some examples, the traffic lighting solutions, the sign structures, highway safety barriers and solutions that help enable mass transit. In the lighting space, on our standard lights think of when you're driving down a roadway, an interstate or a highway you see our street lights or our high-mast lights; aerial lighting, which is really associated with commercial space, retail, hospitals, schools; decorative lighting, which is a little more customized and ornate solutions for high-end jurisdictions or more creative environments; and lastly, sports lighting, and sports lighting is really affiliated with large sports parks. We happen to be affiliated with one of the largest sports lighting firms in the world, and we provide the structures for their solutions. So I want to talk about our global footprint, operating in 20 countries. The significance of that is that is a competitive differentiator for us. It gives us unparalleled scale and capacity. It allows us to source both locally and globally, which means we need to leverage our competitive advantage by operating out of some of the lowest cost operating centers in the world, like China and India, but when jurisdictions require that it be manufactured and produced locally, we can do that as well. And it allows us to have industry-leading lead times because of the diversity of our footprint. The next slide actually does a great job of encapsulating why Valmont is a premium brand. Industry-leading quality, the depth of our technical resources allows us to pursue the most complex and large opportunities as well as the small and the simple opportunities. We have unparalleled portfolio breadth. We have global supply chain and industry-leading customer service. So that's a little view of what's going on inside Valmont. Let's step outside and look what's going on in the marketplace. This slide is highlighting U.S.-based macroeconomic indicators. We've chosen these macroeconomic indicators because they have a high correlation coefficient with our product lines. So roads and bridges, as an example, over time, with a lag, as the government spends money on roads and bridges, we see growth in the lighting and traffic space, in the highway safety barrier space, in the bridge girder space. With commercial development, as spending ramps up in commercial development, we see growth in the area lighting and decorative lighting space. With single-family residential and multifamily residential, there's a high correlation coefficient to growth in street lights and in traffic light structures. Indirectly, that suburban sprawl usually drives commercial development, which then also positively impacts our aerial lighting. And you can see on the slide that we're seeing very robust growth over the next 3 to 5 years. The compound annual growth rate is in the 6% to 7% range. So you can see in our core business, there's good momentum and good projections. As we look at the next slide, in our addressable, how do we expand our addressable market? The great news is, even though we're market leaders around the globe, there's abundant opportunity for us to expand our addressable market. Organically, for example, in the U.S., we really only effectively serve probably 30% to 40% of the sign structure business. In India and Asia, we probably only effectively serve 20% to 30% of the highway safety business. So great opportunities for organic growth. There's an abundance of new products available for us to pursue. I've highlighted 3, just as an example. In the smart city arena, we project exponential growth over the next decade. This is really the Internet of Things. The bridge girder space, it's a new space for us, but there's tens of thousands of dilapidated short-span bridges in the U.S. alone, and you saw in the previous slide has a compound annual growth rate of 6%. The third one is bus charging stations. These are rather complex structures that allow us to remotely charge an electric bus when it's on its route. Now we're on the very front edge of this opportunity, if you will. But in the next 10 to 15 years, our research indicates that 80% to 90% of all buses will be converted to electric. So a great opportunity. Lastly is just geographic expansion. We have the ability to take our great capabilities in sign structure and move that to Europe, in Asia Pacific or our Highway Safety business and move it to the Middle East or Africa. So we're excited about what's going on in our core business, but we're also very excited about what's going on to expand our addressable market. I'd like to spend the rest of time talking about our strategy for long-term profitable growth. And it really revolves around 3 pillars: elevating operational excellence and a focus on ESG; accelerating innovation and integrating technology into our structures; and then lastly, improving our market performance through portfolio expansion and price leadership. So let's jump into the first pillar. I'm so proud to be a part of a company that's such a positive impact on society. In the Lighting & Transportation space, we help reduce auto emissions by enabling more efficient traffic management. We reduce fatalities and injuries on highways and interstates by revolutionizing the design for highway safety barriers. We improve safety and reduce crime by creative area lighting solutions. And by enabling real-time monitoring, environmental factors of traffic and of crime, we improve the safety for citizens and also reduce energy usage. In the operational excellence arena, I'm not going to talk about manufacturing because Diane is going to cover that later, but I want to talk about our digital transformation initiative, truly focused on back-office and improving the customer experience. So as we go to the next slide, I'm going to try to summarize this simplistically. Simplistically, this is one set of systems, tools and processes to allow us to configure, price and quote our solutions as opposed to disparate systems, tools and processes based on geography or based on the type of material. It also allows us to dynamically leverage our technical resources around the globe. Today, they're isolated, they're siloed. So what this means for Valmont is greater efficiency, greater cost savings and greater scale. The translation for our customers are reduced cycle times, reduce lead times. The ability to self-configure their solutions, standard solutions, self-configure them, submit the order themselves. And this will reduce their cycle times, and do this in a 3D environment. Lastly, we have evolved our customer portal, where our customers will be able to track an order from the time it enters our manufacturing facility to the time it's delivered to the job site. Now you might be thinking this is standard in many industries. It's not standard in our industry. And as Steve started out saying, we want to lead the digital customer experience for the Lighting & Transportation space. The next pillar is around accelerating innovation. And the topic I've chosen is smart infrastructure. Think of this as the Internet of Things. And I said smart infrastructure because it could be a smart city, it could be a smart campus, it could be a smart business park or sports park. There's literally hundreds of use cases associated with the Internet of Things. Now I've summarized them into 3 broad categories of monitoring, commercial enablement, video surveillance. If you go to the next slide and we look at the case study, the challenge isn't that there aren't enough applications, it's they're very fragmented. Different jurisdictions hang them on different structures, it could be a different government entity, it could be a private entity. What we bring is the digital gateway. And the digital gateway is the confluence of the structure partnering with the application providers, creating a mechanism to transmit that data simplistically, aggregate the data and put it in a usable form for customers. Now the good news is this isn't new to Valmont. You heard Lennie talk earlier, we do this in the irrigation space today for farmers. It's new to our space, but it's not new to Valmont. And what it really allows the jurisdictions to do is simplistically aggregate and consume the data, and that's the challenge today. It's available, it's out there, it's just very fragmented. And we would like to be the engine that makes that real. Moving on to our third pillar, which is really rounding -- expanding our markets through strategic focus areas. I just talked about the smart infrastructure environment. This allows us to move up the value chain in existing markets to further penetrate them, to find new business models and recurring revenue streams. So that's exciting and new, but we also have to focus on the basics. Historically, we've probably put too much emphasis on revenue growth. Now what we need to do is focus on both revenue growth and ensuring that it meets our profit targets and our return on invested capital. We need to be consistent in market and pricing leaders around the globe, not just in North America. The digital transformation initiative needs to be focused, certainly, on making us more efficient, but also enabling a differentiated customer experience to drive differentiation. And lastly, we have to prune the trees. We have to ensure that we are divesting or deselecting low-profit and low-growth product lines, similar to the announcement we made at the end of the fourth quarter around the divestiture of the Access business in Asia Pacific. So let me just wrap up by saying, once again, Valmont is a recognized leader globally in the Lighting & Transportation space based on the quality of our solutions and the breadth of our portfolio. Our focus on operational excellence allows us to more consistently deliver quality products, meet or exceed customer deadlines and earn a price premium. The breadth and the depth of our engineering resources and Valmont's continual focus on R&D facilitates industry-leading innovation and technology evolution. And lastly, there's abundant opportunities for us to further penetrate our existing markets with new solutions and pursue geographic expansion globally. I thank you for your time today, and I'd now like to turn it over to my esteemed colleague, Joe Catapano.

Thank you, Tim. My name is Joe Catapano, Group President of Telecommunications for Valmont Industries. I've been in the wireless infrastructure business since 1995. In 2004, I founded a wireless infrastructure components business called Site Pro 1. And that company was acquired by Valmont in 2008. Interestingly, I had a 5-year earn-out plan as part of the acquisition. And it was my plan to finish the 5 years and move on to the next opportunity. However, I stand in front of you 13 years later discussing the exciting opportunities at Valmont. It's a great testament to Valmont to allow an entrepreneur to flourish within the corporate culture here. Some key takeaways from my presentation today is best-in-class customer service is a true differentiator for our components business. The build-out of the 5G networks due to the demand for speed and data provides significant opportunities for Valmont. Valmont is well positioned to benefit from the closing of the digital divide. And we have meaningful expansion opportunities, utilizing our successful and proven North American playbook, combined with leveraging our international footprint. Global telecommunication snapshot just gives us a look at the product portfolio behind the telecommunications group. The first product group is the 5G concealment, and this is small cell poles. These are light poles that serve double duty as communication structures and light poles. They may have a 4G or a 5G antenna or both and the radios. Sometimes the equipment is installed inside the pole and sometimes it's strapped on to the pole. This is a key driver for our business moving forward. The second key driver for our telecommunications group is the wireless components business. This is Site Pro 1 specifically. This company is focused on antenna mounts. So these mounts are used both in new site builds as well as co-locations where a carrier is added on to an existing structure. The components business also sells 3,000 different products that are used in wireless site construction. And this is the second big driver in our business. Valmont also produces large structures, the macro towers. Those are monopoles, self-supporting towers and guyed towers. And we recently entered the disguised tower market with the acquisition of Larson Camouflage. This company could turn a macro site into a palm tree, a pine tree, a church steeple or even a clock tower. It's a niche part of the business, but with the proliferation of 5G antennas, we expect the demand for camouflage to increase. Our global telecommunications footprint. The business today is primarily in North America. But I'm confident that using our successful proven playbook from North America and transitioning it to our international sites that we can grow our telecom market share in the international markets. Sustainable competitive advantages. Right there in the bull's eye, Valmont premium brand and reputation. And this is a real advantage for us. Valmont's been in the wireless infrastructure business for many years, and we have long-standing relationships with the carriers the construction companies, the build-to-suit companies and the engineering firms. I also want to hit on the industry-leading response time for our components business. I'm going to talk about it more during the presentation, but it's a true differentiator for us. I'm really excited about where Valmont sits and the scope of this 5G build-out. Some analysts are saying that the carriers will build more sites during the 5G build-out than they've built in their entire history. Now just take a moment and think about that. Some of the drivers in the 5G build-out, the Internet of Things. As the 5G network is built, there will be a proliferation of connected devices that will help drive demand for more infrastructure. The closing of the digital divide, the COVID-19 pandemic, where people are working from home and schooling from home, has really brought into light the differences in connectivity speeds between rural America and urban America. Today, both carriers and the federal government are allocating dollars to build out the rural networks, and Valmont is well positioned to take advantage of this. The entrants of new participants. The wireless infrastructure business has always been built around demand created by 3 or 4 major carriers. Last year, we had the merger of T-Mobile and Sprint. So we lost a carrier there, but DISH network has stepped up and filled the place and they're building their own 5G national network. And also interesting was the 5G spectrum auctions for the C-band, where we saw cable companies and self-maintained users buying spectrum. So the diversity and the size of our customer base is going to grow. As you see, we have a lot of room for growth. Expanding Site Pro 1 globally, using our existing business model combined with our global footprint, continued development of our small cell pole solutions. PIM mitigation is another growth area for us. PIM is passive intermodulation. This is interference with the carrier's RF signals created by passive sources, not powered active sources. So dissimilar metals being bolted together, corrosion or loose metal to metal connections can actually interfere with the carrier's RF signal, especially at the high-frequency 5G spectrum. Site Pro 1 is introducing a product line to mitigate PIM, and we'll be launching that soon, and we expect it to be a good growth area for our telecom business moving forward. The pillars of growth, elevating operational experience. This really is a relentless focus on our customers' experience. And expanding our markets, spoke a little bit about growing our share in the international telecom business. Most importantly, I really want to touch on accelerating innovation. Valmont is no longer just a pole provider. We, today, add value to our customers by offering expertise in designing small cell poles. We do equipment layouts, determine whether equipment should go inside or outside the pole, wiring diagrams and even the actual wiring of the poll before we ship it, if so desired. We've also developed expertise in CFD analysis. This is the analyzing of the thermal dynamics within the small cell pole. So we look at how much heat the radios are generated, the radios that the customer chose, and we determine how to dissipate that heat. So we may use passive venting or the use of active fans. We've also designed our own unique fan controller, which is a variable speed controller, which is unique to Valmont. We're also developing 5G transparent materials. So these are materials that could sit in front of a 5G radio without degrading the RF signal. And this will allow us further concealment options moving forward for the 5G sites. Case study, built for speed and customer satisfaction, Site Pro 1. We know the wireless business. We know the sense of urgency. We know that speed is required, and we've built the business around this demand. So this is a day in the life for Site Pro 1. I'm going to walk an order through the system and show you how it works. So at 3:00 p.m. customer places an order online for a monopole platform. This is a large item, maybe 2,000 pounds, 10 to 14 feet long. Within a minute, he receives acknowledgment, we've got your order, we're going to take care of it. Within 15 minutes, the customer service rep has entered the order and chosen the best warehouse to ship the order from. They've now sent it to the warehouse floor. And within an hour, the order is bundled. The steel is bundled. The hardware is packaged and is ready to ship. And they do so following strict packaging standards established by Site Pro 1. And what we want to do is ensure that our packages, when they reach our customer, look exactly the same way as they did when they left our warehouse. By 4:45, this order is ready to ship, and the Bill of Lading is filled. And later on the day, it will be picked up by a trucking company. In the evening, the customer receives a tracking number, so they can track their shipment as well as a packing list for their shipment. And the next morning, it's delivered right on the customer's site. So 95% of our components orders at Site Pro 1 ship complete the same day. Now maybe even more impressive, 99.4% of our orders ship out without any mistakes. So no counting errors, no missing products, no wrong ZIP codes, I mean almost perfect execution. Elevating our customer experience, we focus on the customer. Over the years, we've built our telecom group through acquisitions and building new business units within the group, all operating separately and independently as separate companies. And we recognize that this was becoming difficult for our customers. Quite frankly, we were difficult to deal with. Our new one face to the customer initiative, provides one point of contact for our customers no matter what telecom products they are seeking. And speaking of ease of use. In the small cell pole arena, if a customer wants to put up a small cell pole, they have to go through a permitting process either with the city or municipalities. And to do so, if they're using a Valmont pole, they get the advantage of our preapproved status. Valmont has been building light poles for over 50 years. We are preapproved in every single city. And sometimes we're the only pole a city will allow customer to erect. And not only that, but we have an agent network that works with the local agencies and can actually help our customer walk through the permitting process. And standardization, the number of inquiries coming in, as the 5G build-out has started, is already increasing rapidly. And we recognize over the next couple of years, there's going to be more and more inquiries coming in. So we want to focus on moving our business from a business where we custom-engineer every project to a model where we have standardization, a catalog of standardized products pre-engineered that our customers can choose from to configure their own pole. Result of this will be decreased lead times and decreased response times, greater customer satisfaction. Also on this slide, you'll see some customer testimonials. And I think these are great. They really show how the customers react to our customer-centric culture. I've spoken about the digital divide. I just want to point out that Valmont is committed to closing the digital divide by providing vital infrastructure products and aligning with the organizations focused on spreading inclusive connectivity. And those will be WISPA and the American Connection Project. Strategic focus areas: number one, leveraging that Site Pro 1 business model to expand it internationally; number two, capitalizing on a Site Pro 1 success by adding more locations in North America, getting closer and closer to our customer base; and number three is enhancing our PIM mitigation and small cell pole capabilities. In summary, we're in the early stages of a big opportunity, and Valmont is well positioned to win. Thank you for your time, and I'm now going to hand it over to Rick Cornish, President of Coatings.

Thank you, Joe. Good morning. I'm Rick Cornish, and I'm the group President of Valmont's Global Coatings segment. This year will mark my 25th anniversary at Valmont, and I have over 33 years in industrial coatings. And it's truly a pleasure to speak with you today about our business. At Valmont Coatings, what we do is provide durable and functional coatings solutions to protect and enhance our customers' products. Simply put, we make our customers' products look better and last longer by protecting the metal from the ravages of corrosion and premature obsolescence. 25 years ago, Valmont had one galvanizing operation in Valley, Nebraska. Originally built in the 1960s to serve our irrigation business, Valmont had worked diligently at providing a world-class coating to go on the center pivot irrigation system. Over the past 25 years, we have taken that core competency and expanded it globally. That network of facilities is why we believe we are uniquely positioned to capture compelling industry trends. We have a powerful ESG story that's driven by how we do our processes and the incredible story of zinc. We seek out, listen to and measure ourselves based on our customer feedback. We then utilize that information to get better at all our facilities around the world. And a focused effort on embracing technology has led to innovative solutions that are disrupting our markets, and we are only scratching the surface. In 2020, one of the most challenging years that we have ever experienced, we generated $345 million in revenue. The revenue split is 71% North America and 29% international, and we serviced over 15,000 active accounts. Our 36 facilities in 7 countries and 1,900 employees provide a wide variety of coating solutions. Hot-dip galvanizing, shown on the left, is the process of fully submerging fabricated steel products into a kettle of 99% pure molten zinc. It not only fully covers the product surfaces inside and out, but it bonds with the steel at a molecular level, providing one of the most resilient corrosion systems available. Once galvanized, the steel can last for generations and is virtually maintenance free. With our Applied Coating Solutions, pictured in the middle, we provide anodizing, e-coating, powder and liquid paint systems as well as other surface treatments. Painting over galvanizing is called a Duplex system. The combination provides a powerful synergistic coating that can also achieve specific aesthetic requirements. Value-add services, pictured on the right, can include transportation, sourcing, kitting, masking and storage. We actively partner with our customers to identify opportunities in driving out waste and getting product to the market. Our global coatings footprint has proven to be synergistic and powerful. In North America, our network is literally coast to coast, and this gives our customers the confidence that we can seamlessly service their needs with no interruption. We have the leading position in Australia and New Zealand, and our network of facilities has access to over 90% of the fabrication markets there. In Asia and India, the demand for our services has continued to grow with the need for critical new infrastructure. We continually evaluate the many opportunities globally where we can expand our proven systems. What are our sustainable competitive advantages? The Valmont brand and reputation is a powerful tool as we go to market. The name is known and trusted globally. We are a service provider, and voice of the customer is how we do business. Innovation and technology is how we communicate with the customer, process the material, harvest powerful data, digitize processes, standardized work and increase quality. We have a compelling ESG message: our largest consumable, zinc, is essential to life on this planet. The vitamins I took this morning contain it. Zinc is sustainable, resilient and infinitely recyclable. Hot-dip galvanizing, when evaluated under the intense scrutiny of product life cycle assessment, has the lowest carbon footprint. We institutionalize our competitive advantages into what we call the Valmont Coatings Operating System, that ensures best-in-class quality and is how we do business globally. Last Investor Day, I discussed the war on corrosion and the pervasive menace it presents to the world's critical infrastructure. Improperly protected steel can fail in just a few short years. Galvanized, it can last for generations. The need to protect critical infrastructure globally has never been greater. Steve is always challenging us with thought-provoking articles. And one he shared with me recently was how the steel industry was addressing their carbon footprint. The technology under review was cutting edge, and it will take years to implement. We then discussed that for every 1% increase in specifying galvanizing as a corrosion solution, the reduction to carbon footprint is substantial. Not only that, it's immediate and requires no new technology. The steel around the world that can benefit from galvanizing is simply enormous. What is our plan to grow the Coatings segment? Our #1 growth driver continues to be acquisition. The coatings industry is highly freight sensitive and so proximity to the fabrication market is key. We looked globally at the market and have developed strong relationships. We have developed and maintained a very robust acquisition pipeline. Building new facilities is always an option, and we just started our newest location near Pittsburgh, Pennsylvania. Expanding our service offerings in Applied Coatings and adding value-added services at existing locations is extremely impactful. This allows us also to offer the customer even more solutions. Our digital transformation continues and expands the productivity and capability of all our locations. It drives our quality and our ability to ship complete on time. In the last 3 years, we've added total productive maintenance to our Valmont Coatings Operating System, and we measure it by overall equipment effectiveness, or OEE. Our operating system identifies specifically what is causing process interruptions and allows us to address the most impactful needs. Over the next 3 years, we will beat market growth, and we're targeting a 5% plus compound annual growth rate. To achieve our growth objectives, we will rely on 3 following strategic drivers: operational excellence is key. Lean methodology supported by agile project management is how we execute. Our strategic plan metrics are tracked, the root cause of underperforming processes is identified, and focused countermeasures are implemented. We monitor these metrics at a global level but can easily drill down to specific plant and operational lines. We focus on the critical few things. We continually look at ways to expand markets by providing additional services and solutions. We partner with our customers to see how we can drive out waste in the supply chain and address their challenges. Innovation is an amazingly powerful disruptor. We have a full-time innovation and demand creation team, and the solutions they develop never cease to amaze me. We have always maintained meticulous data at a very granular level at our operations. Digitization makes that data readily accessible. In baseball vernacular, coatings is all about small ball. A small change multiplied across millions of pounds of production can yield huge results. Harvesting that data, looking how technology can provide a solution and deploying that technology around our system is very effective. That is our innovation team's full-time job. The Valmont Coatings Operating System is a multi-disciplined approach to running our operations that is documented, transferable and continuously improving. It includes safety, environmental, lean, leadership development, finance, forecast planning and analysis, innovation and total productive maintenance. The growing resources of Valmont University allow us to memorialize that training and share it globally. The Valmont Coatings Operating System also allows us to conserve energy and valuable commodities while recovering and recycling the byproducts. Galvanized steel structures are recognized for their superior grid-hardening characteristics and maintaining vital services even in the face of natural disasters. The voice of the customer is critical in a service-intensive business like Coatings. Annual satisfaction surveys provide critical insights into what we are doing well, but more importantly, where we can improve. Over the past 3 years, our Net Promoter Score has improved significantly. We find that satisfied customers stay and attract new customers. The feedback also gives us actional insight as to what additional solutions our customers are looking for and then we can roll those out at a site-specific level. We are normally one of the last stops as fabricated product makes its way to the final customer. Valmont Coatings Connector gives our customers unsurpassed access to the status of their product and confidence as they communicate with their customers. Innovation is not a part-time job. A few years ago, we established the position of Vice President of Innovation and Demand Creation. That position has a team of very talented and creative people that look at turning the voice of the customer into real products and services. A mature digital transformation journey is underway, and solutions are developed and delivered in the cloud to connect, partner and grow with our customers. Our innovative Valmont Coatings Connector was developed in response to a customer requirement that they wanted transparency of their product throughout the coatings process. VCC is driven by GalvTrac, TankTrac and kettleboard processing systems that were all developed in-house. We've started to harness the power of artificial intelligence and combine it with our vision systems to actually execute the scripted galvanizing process. We have an initiative called Lights Out. Our goal is to have that operating system run the galvanizing process from start to finish. We can then utilize linear optimization to minimize process time, reduce energy consumption and raw materials. It will also ensure the highest quality continuously. We have just launched a significant enhancement to our Valmont Coatings Connector called VCC Max, and that will continue to link the communication and integration of all our processes and become our global operating platform. Showpad is the single source of truth for sales and marketing content and allows us to drive meaningful buyer engagements. These powerful tools all combine to provide precise operational control, clear customer visibility and an unmatched customer experience. We are disrupting the industry. In summary, we are uniquely positioned to fully take advantage of growing markets. We will focus on operational excellence and continuous improvement at all our facilities. We are committed to ESG, and it is the perfect format to communicate our remarkable solutions. We will continue to build deep customer relationships and embrace their gift of feedback. And we are the industry leader, and we will continue to deploy disruptive technologies to the benefit of our customers. The first 25 years of Valmont Coatings has been exciting, but I'm even more excited about what's coming in the future. Thank you very much. And now I will turn this over to Diane.

Thank you, Rick. Good morning. I'm Diane Larkin, and I'm the Executive Vice President of Global Operations for Valmont. I'm excited to join you today and share our vision for Valmont's operational transformation. I'm fairly new to the organization, and I'm still learning the industries. I was drawn to Valmont by its rich culture and core values as well as the leadership's desire to embark upon an exciting transformation. I bring a wealth of experience in shaping a global operation to garner results as well as foster a lean and inclusive culture. I look forward to partnering with the team to lead Valmont through our evolutionary journey. What you're going to hear today is that ESG is at the center of our entire strategy. We're not just giving it lip service but are genuinely invested and investing in our operations, supply chain and communities. We are also focused on disruptive technology as the path forward to elevating our operational excellence, and we have an exciting video to share that highlights some of that innovation as well. Of course, none of these improvements sustain if we do not infuse lean thinking into our culture. We are using continuous improvement as our enabler that ensures our success. The ultimate goal is that lean is not just some other function or something that we do, but it's the vehicle by which all things are driven. And finally, streamlining and simplifying our business is an imperative to achieve the agility and flexibility required to serve today's fast-changing markets. In our last Investor Day, we described our focus on metrics, the improvement in our planning system as well as the change in our operation's organizational structure that best leverages our footprint across the infrastructure businesses. Building on that strong foundation, we are better able to shift our focus to our strategic imperatives. Therefore, the focus of our presentation today is on ESG, disruptive innovation, lean fundamentals and culture and simplification. To posture us for disruptive technology and innovation as well as the heavy lift of simplifying our businesses, we need to have the right organizational structure and lean excellence culture. That is why we recently restructured our EHS, operational excellence and global supply chain to better leverage our entire organization with a centralized approach in these areas. Additionally, providing an approach to lean excellence that elevates our vision to world-class levels and ensuring we drive our results and problem-solving with a data-centric approach is key. These enablers increase our success ratio as we embark upon our connected and Industry 4.0 technologies as well as design enhancements, footprint strategies and systems optimization. ESG starts in our house we believe that influencing our broader sphere has to be rooted in our core values in what we do to walk the walk in our own plants and operations and ensuring that our most precious assets, our people, are provided a most desired work environment. Our sustainability goals as an organization start in our plants. We are absolutely committed to our goals to reduce carbon intensity, electricity and combustion fuels to historic lows. We are not just stating these goals, but have hard investments in electric vehicles, LED lighting and common area upgrades to ensure upgraded water standards, just to name a few. The health and safety of our employees is paramount. Not only are we evolving our metrics to reflect leading versus lagging indicators, but we have also launched a personalization campaign to make it safe, make it personal, make it home. We encourage grassroots programs and require engaged hands-on leaders. Our metrics have shown an improvement over time, but we are never done continuously improving and driving a behavioral-based culture. We also understand that partnering with like-minded ESG forward suppliers is important as well. We are taking steps to ensure our valued partners acknowledge our policies and requirements around human rights and have embedded ESG in our selection and scorecard tools. Additionally, we support the move among some steel suppliers to pilot hydrogen technology in steel production and stand ready to link arms when that time comes. Finally, we are proud of our community outreach programs from Jasper, Tennessee. They are the best practice, not only for our entire footprint, but for many corporations. We are proliferating this model across our organization to maximize our approach to truly being a family member in our own communities worldwide. Featured here are just a handful of examples of programs to educate, foster and support Marion County and surrounding areas with job fairs, career days, Red Cross fire protection training and many others. Our partnerships impact the lives of so many by providing hope and lifelong skills while also providing a pipeline of talent knowledgeable to the Valmont way. Our lean transformation is imperative to our sustained success. Starting with a deep assessment of the lean maturity in our plants along a continuum that includes foundational elements, material and information flow and a lean culture, we can craft a road map that includes developing each site and ultimately leading to targeted smart factories. Our goal is to have a culture of continuous improvement in several locations as proofs of concept. The pyramid in the below right demonstrates our initial assessment of our North American operations manufacturing sites along this maturity continuum with the size of the bubble indicating the size of the site. Understanding this current state is just the beginning, but we are on our way. We aspire to and have invested in disruptive technology. These innovative programs include the use of the Internet of things to connect our factories' information flow, from the suppliers, to our warehouses, through our factories, to our carriers and ultimately, to our customers' sites. We are committed to ensuring our customers receive world-class levels of service. We look forward to piloting this specific technology in 2022. In conjunction with information flow, we are embarking upon our journey with Industry 4.0, with connected equipment, automated controls and cutting-edge technologies in all of our critical manufacturing processes. Some examples include industry-leading seaming technology, fully autonomous welding, robotic hyperfill stations and precision quality system with phased array ultrasonics. No longer is automation and robotics just a cool thing to do, but the world's shifting demographics make it critical to attract talent and compete. Additionally, our industries have been laggard in technology, and this new-to-industry approach becomes a competitive advantage. The value proposition is varied as Industry 4.0 advances our solutions toward labor scarcity and ESG, while providing superior quality, decreased lead times and order visibility for our customers. Financially, the gains are equally attractive by providing cost savings and greater return on invested capital via lower inventory levels. Our technology road map is targeting our first pilot smart factory in 2022. With Path Robotics, we have embraced a disruptor in the robotic welding business based on its simplicity and efficiency. Our partnership with Path Robotics brings fully autonomous welding to bear on our factory floors. The fully autonomous robotic weld cell increases productivity, reduces cost and improves quality. It sees, scanning each part allowing for a high mixture of nonperfect parts. It understands. It understands what it should weld and how the part may vary from the drawing. It welds. The welding parameters are adjusted in real-time to produce world-class welds every time. There is no programming required, the system requires no technical expertise to operate, simply feed it parts and press the go button. Our final strategic initiative is business simplification. The approach is to review what we make, where we make it and what supporting systems are required. We realized that much of our product is necessarily engineered-to-order and customized, and we continue to innovate around flexibility for our valued customers. Additionally, we have the ability to simplify some of our portfolio and standardize along major platform designs to allow for self-configuration and improved lead times for our customers. Also, we believe that having the optimal global footprint is important to ensure we are servicing our global geographies and providing risk mitigation, while still garnering synergies with similar product lines and core competencies. Our goal is not to consolidate as many rooftops as possible, but rather to understand the optimal footprint to serve our customers. And finally, we have opportunities to streamline our systems and supply chain. We are launching a supplier-relationship management system to provide the analytics required to help in the endeavor as well as standardizing our EHS and quality systems across the enterprise, enabling the agility to pivot our resources as required. One of Valmont's competitive advantages is our ability to leverage steel. As you likely know, our largest cost of goods is the steel commodity, and being able to flex capacity is critical for our markets. Inflation in this commodity has increased at record high rates since August of last year. Along with that inflation came availability constraints. If not prepared, many suppliers were left flat-footed and scrambling for steel capacity. Our ability to leverage our size, scale and long-term relationships with our partner steel mills provides us the ability to buy direct and garner steel in a market that today is difficult to find materials even on the spot market. For example, our Irrigation business does not purchase enough steel annually to easily procure steel in this constrained environment, but we were able to secure steel to ensure continuity of service to our customers, where some of our competitors cannot. This demonstrates our competitive advantage to use our scale from our infrastructure business as leverage for our irrigation business. We have multiple playbooks and partners that allow for the reliability and service that our customers have come to know us for and depend on. We have further been able to protect our downside by using pricing strategies to continue to thrive for the long term. Finally, a key core value for us is sustaining results. While we are a results-oriented operation, we also continuously improve upon the metrics by which we hold ourselves accountable. The least sophisticated metrics are internally focused while the most mature metrics are customer-centric. We are purposefully evolving from reactive internal KPIs to more proactive KPIs and ultimately, to predictive KPIs. We are currently using more proactive metrics but are posturing ourselves and actually utilizing some predictive metrics as well. The full shift to predictive KPIs will take a little time as we educate and allow for our customers to get comfortable with our new technology. To illustrate, the reactive quality measurement is simply calculating warranty dollars. But as an organization matures, the primary proactive quality metric is the total cost of poor quality. The best predictive quality measurement is the design for manufacturability rating that mistake proves both the product and process designs, minimizing the probability that a defect would be introduced at all. We are on our journey to predictive KPIs across safety, quality, delivery, cost and cash to better serve our customers. In conclusion, we have been on an exciting journey to transform our operations to world-class performance levels. We have elevated our strategic approach and are proud to have ESG as the common thread throughout our entire value chain. It's exciting to continue our focus on lean excellence and bring disruptive innovation to bear through Industry 4.0. By simplifying our business, we are more agile to execute along all of our trajectories for operational excellence and are now postured more than ever before to achieve world-class goals. In closing, it has been my pleasure to share our vision with you today, and I thank you for your time and engagement. Now you'll hear from Avner, who will cover the financial landscape.

Thank you, Diane. Good morning, everyone. I've spoken to many of you over the past year. For those I have not met yet, I joined Valmont a bit of a year ago. And prior to Valmont, I had several CFO positions for private equity-backed companies and spent more than 15 years in senior financial and operational roles in publicly traded manufacturing companies. I have significant experience leveraging lean principles, including developing and deploying lean management systems and utilizing technologies such as AI, machine learning and robotic process automation, or RPA, to enhance shareholder value by providing consistent, accurate and reliable information to support strategic decision making. I was drawn to Valmont for its people, mission and growth potential. It's been an exciting and eventful time so far, and we have accomplished a lot already. I'm looking forward to driving continued financial improvement for the company and adding value for our stakeholders. Let me move now to my main areas of focus, of which I will provide additional color throughout the presentation. Shortly after joining Valmont, I focused on transforming the finance function into becoming a key enabler for the company in order to achieve our overall strategic goals and enhance stakeholder value. We will continue to leverage our capital allocation framework and strong balance sheet, which are core assets of the company's financial strength and strategy. We will maintain a balance between investing in the business to drive growth, preserving our strong balance sheet and financial flexibility and returning capital to our shareholders across economic cycles. And all of these actions are driven by the overall goal of continuing to execute on our strategy with heightened focus on return on invested capital. It became very clear to me after joining Valmont in the onset of the pandemic that our company has a very strong culture and brand, evident in the resilience of the business and team to manage through cycle. We were very successful navigating through the uncertainty and headwinds from the COVID pandemic by proactively taking quick and decisive actions, which led to strong results in 2020. But we can always get better. One area I've identified as a significant opportunity is to capture greater ROIC and cash flow generation by transforming the finance function. To achieve this transformation, we're taking a twofold approach to creating value within our key focus areas. The first dimension centers on our 3 pillars of success. The second dimension is comprised of our specific focus areas, which you can see also overlaps between pillars. So these 2 dimensions are very much working in tandem. Our 3 pillars: enhanced business partnership, centers of excellence and shared services are the foundation through which we achieve transformation. And our specific focus areas: advanced technology and automation, data science to support real-time decision making, a high-performance finance culture and quality of service, these are the levers we're pulling to enable our success. Now I want draw the connections between our pillars and focus areas in real-life term. Our first pillar is business partnering. The business partners who are essentially segment-level CFOs, act as strategic advisers to our businesses. We know that one of our key assets is our talented people. So we continue to build a high-performance finance culture by enhancing the organization's digital IQ and increasing our focus on business partnering. Importantly, we are determining the best uses of capital by focusing on those areas where finance and businesses work hand in hand to maximize ROIC. Our second pillar is centers of excellence, or COEs, which includes essential functions like FP&A, treasury, tax, internal audit and technology. The centers of excellence deliver subject matter expertise and provide insight, analysis and support to the businesses. We will also deploy data science capability and leverage AI and machine learning to develop a quantitative research-based approach to forecasting and real-time decision making. One example where we've had success is in our Coatings business, which operates with minimal backlog. We can predict short and midterm demand at a very high level of accuracy using AI and machine learning, and we can take proactive actions to flex our workforce, optimize our cost structure and drive customer satisfaction. The third pillar is shared services. Our shared services team is increasing their use of advanced technology, automation and lean to streamline processes, allowing us to redeploy capital and people to more strategic opportunities in the business while increasing the quality of support across the organization at a lower cost. For instance, we will use RPA and machine learning to optimize the accounts payable process, lowering overall invoice processing costs by eliminating repetitive data entry and allowing employees to focus on higher-value work such as optimizing payment terms to improve cash flow. Through this focus on business partnership, COEs and shared services, we are creating a world-class finance organization and equipping ourselves with the tools to further enhance value. Talking in the abstract about impact of finance transformation is one thing, but to illustrate the power in impact, I'd like to share an example of improving ROIC for a product line. So imagine this, a business partner receives real-time product line performance and analysis from shared services and COEs and identifies the product line with less than optimal ROIC. The business partner works with the business and develops a strategy to improve ROIC. Throughout the strategic development process, the FP&A Centers of Excellence uses advanced technology to provide scenario planning and predictive analytics to forecast outcome, maximize growth, reduce costs and optimize ROIC. Next, the tax and treasury COEs provide inputs and scenarios to optimize the effective tax rate, maximize cash flow and provide the lowest or most effective weighted average cost of capital. Once the strategy is defined and is being executed, the business receives ongoing real-time information, insights and analytics to ensure the desired outcome is achieved. This is why we're transforming the finance function. This is what we hope to achieve. This is what success will look like for us, a more integrated, collaborative, insightful business in an environment where the finance function is a key strategic enabler and enhances stakeholder value. We have just begun this journey, and I'm very excited about the momentum we are gaining and the endless possibilities to drive value for our company. Valmont has demonstrated its resilience and ability to execute through the cycles. Even during down cycles, we have been able to maximize profitability while still investing for growth with disciplined and balanced capital allocation. Moving to our strong cash flow generation. Our long-term goal is a cash flow conversion of onetime net earnings, which will fluctuate year-over-year due to project timing and inflation. In the past 2 years, we have had very strong cash flow and are continuing our heightened focus on cash flow generation and the cash conversion cycle through many of our strategic initiatives. For instance, we're focused on optimizing inventory including factory automation, inventory standardization and utilization of global supply chain and strategic relationship. Furthermore, we are using analytics, RPA and BI tools to drive cash optimization. One example is in accounts receivable, where we are improving collections, risk management, customer analysis and cash flow management. And lastly, on this slide, as always, we have a disciplined, process-oriented approach to business investments. Turning to the balance sheet and liquidity. We ended the first quarter with nearly $392 million of cash. We have no significant long-term debt maturities until 2044. Our total debt to adjusted EBITDA leverage ratio of 2.1x remains within our desired range of 1.5 to 2.5x, and our net debt to adjusted EBITDA ratio is at 1x. As mentioned earlier, we recently completed the acquisition of Prospera, financed through a combination of $200 million of cash and $100 million of borrowing from the company's revolving credit facility. We expect to repay these borrowings within 12 to 18 months. We have a strong balance sheet and ample available liquidity to continue to support our long-term strategic goals. We are highly focused on maintaining this liquidity to support operation and retain our investment-grade credit ratings. As I mentioned earlier, our capital allocation policy is one of our core assets. Our objective is to create balance between investing in the business for growth, preserving our strong balance sheet, leverage and liquidity position to ensure financial flexibility and returning capital to our shareholders across economic cycles. Over the last 3 years, we deployed approximately $950 million of capital with approximately 2/3 invested in the business and 1/3 returned to shareholders. Our highest priority is to reinvest in the business to drive organic growth, followed by acquisitions with the belief that this will drive the highest return for our stakeholders. Our CapEx in 2021 is projected to be between $110 million to $120 million, which is about 50% growth and 50% maintenance. CapEx will be used to support strategic growth initiatives, digital customer experience, Industry 4.0 advanced manufacturing and ESG-related initiatives. We are prioritizing projects with a high return on invested capital. We have a good pipeline of acquisitions. And in subsequent slides, I will provide additional insights regarding our approach and performance over the past few years. We will continue to return cash to shareholders through share repurchases and dividends. As it relates to share repurchases, we will maintain an opportunistic approach based on our cash flow generation and the intrinsic valuation of our stock versus other uses of cash, whichever provides the best returns. On dividends, in February, we announced an 11% dividend increase, which followed a 20% increase in 2020. Our goal is to increase the dividends over time as a function of earnings growth. As such, we are raising our payout ratio target from 15% to 22% to align with our strategy of an increasing return to shareholders. In summary, we are maintaining a disciplined and balanced capital allocation driven by ROIC and creating stakeholder value. Turning to our approach on acquisitions. One of our strategic focus area to drive growth is through acquisitions. Our goal is to increase our portfolio breadth and expand our addressable market through technology acceleration and investment in global and high-growth businesses. Our bolt-on acquisitions are year 1 EPS accretive and will typically drive sales and operational synergies, which improve our quality of earnings and get us closer to our long-term financial targets. We have a rigorous and disciplined approach around due diligence and integration to ensure we meet our goal of ROIC exceeding our cost of capital by year 3. Let me illustrate the strategy with a look at the acquisitions we completed over the last several years. First, as shown here, all the acquired companies align with one or more of our strategic goals. Technology acceleration and high-growth business investments in solar and irrigation increased our portfolio breadth across all segments with a global product line focus in irrigation and utility support structures. Overall, our acquisitions have been EPS accretive and are driving significant EPS growth. We are slightly behind on exceeding our cost of capital by year 3, mostly due to impacts from the COVID pandemic in 2020. We are executing plans to improve performance and expect meaningful improvements over the next few years towards hitting our financial targets. As it relates to the Prospera acquisition, the transaction is perfectly aligned with our technology-enabled growth strategy. It strengthens and significantly expands our total addressable market enabling future growth through less cyclical recurring revenue sales. We recently closed on the transaction and plan to share additional financial detail during our second quarter earnings call. Next, over the past 10 years, we have increased our dividend at a CAGR of more than 11% with a goal to continue to increase our dividend over time as a function of earnings growth. We recognize that dividends are an important part of the return on capital to shareholders and are proud of our strong track record. We are increasing our 2021 earnings per share outlook since our last earnings call. We now expect $9.30 to $10 diluted EPS to continued -- its strength in agriculture markets and higher grain prices, which are driving improved pricing and irrigation. Net sales are estimated to grow 9% to 14% year-over-year, which assumes a foreign currency translation benefit of 2% of net sales. And in Irrigation, we expect full year sales to substantially increase 27% to 30% year-over-year based on the timing of deliveries of the large Egypt project, strong net farm income driving positive farmer sentiment and a robust Brazilian market. We also continue to take quick and deliberate steps to implement pricing actions across all segments given the unprecedented cost increases in raw materials and freight. We expect another solid year of positive free cash flow, driven by our emphasis on improving the cash conversion cycle and strategic inventory management. The raw material inflation can create short-term impacts on cash flow. We have enacted strategies to manage these impacts, including certain raw material financial hedges to cover backlog. As Steve mentioned earlier, we are announcing our 3- to 5-year financial targets. Our strategy is working, and we remain focused on execution and confident in our ability to achieve our targets. Our goal is to grow revenue at least 7% organically and 12% including acquisitions. Investment in R&D and value-enhancing acquisitions are driving revenue and EPS growth, margin expansion and improved ROIC. Our entire team is working to achieve EPS growth between 13% and 15%, with margins of more than 12%. Our strategic working capital initiatives enhance our strong cash flow generation, which gives us confidence we can generate free cash flow greater than 1x net earnings and drive ROIC in excess of 11%. We are focused and confident we can achieve these goals. This leads to how we get profit margins of greater than 12% by 2024. I would attribute this to 3 main drivers: pricing and volume, product line optimization and cost reduction and mix. In pricing and volume, we expect to achieve significant leverage and revenue growth from strategic initiatives and strength in our served markets. This strength, along with our strategic emphasis, has enabled our pricing leadership across all our segments. Our investments in high-growth and high-return businesses are contributing to improved margins as well. Additionally, in product line optimization, the less profitable product lines will be divestiture candidates and replaced with product lines that generate higher returns and improve our quality of earnings. Lastly, as you heard earlier today, we are gaining significant momentum on our cost reduction, automation and productivity initiatives. We are very confident in our ability to achieve our 2024 profit margin targets, given the initiatives we already have in place and further efforts to come. Next is a quick summary of our stock performance over the past 15 years, demonstrating our long-term track record of creating shareholder value. We have seen better performance relative to the relevant indices in recent years with particular strength in 2020, which reflects the strong and decisive execution of a strategy that is working. We believe our ability to execute will keep us on the strong return trend. In summary, I am very proud to be part of this company. We not only have great people and processes but also tremendous opportunity in front of us. I'm excited to help transform the finance organization to a more business-minded, data-driven function, in partnership with the business units. Our capital allocation framework and balance sheet are strong and provide us with flexibility for disciplined M&A while still returning capital to shareholders. We have a clear path to achieve our financial targets by executing our strategy which remains focused on ROIC drivers. Thank you. I look forward to many more discussions with you. And with that, I will turn it over to Steve for his closing remarks before Q&A.

Thank you, Avner. Now I hope you have enjoyed our Investor Day, and I want to just recap the items that we would like you to take away from this day. First and foremost, we are building a strong ESG foundation across the company. We are accelerating growth across the entire portfolio. We're infusing technology within the portfolio, both in our products and services as well as our internal operations. We're advancing operational excellence through Industry 4.0 principles and utilizing Lean and Agile to continue to deliver results. And ultimately -- and what you've heard today is a clear strategy across the portfolio for growth, for profitability and for generating a return on capital. I want to thank you very much for your time today, and we will now turn it over to Q&A.

Welcome back, everyone. We apologize for the technical difficulties. These were issues that were outside of our control, but we all agree that it highlights the need for very good infrastructure. So over the next 30 minutes or so, we will take questions for our second group of presenters who you see here. And we do have the first group available should any questions for those presenters come up as well. So Steve, I'm going to start with you for this first question. This is from Nathan Jones at Stifel. And Nathan asked over the past 10 years, Valmont has grown revenue an average of 4.7% annually and EPS by an average of about 3% to 5%. What changes are needed to reach the new goals over the next 3 to 5 years? Where do you see the opportunity?

Yes. So if you look over the last 10 years, we've divested Donhad. We also had a very sharp downturn in both the Irrigation and Utility segments. And so as we look now and see a 3- to 5-year projection, that is based upon the tailwinds that we see in each of the markets, the historic length of some of these upturns and movements, particularly in the irrigation space. Typically, we see 7 years of down, followed by 7 years of up, just how it works and a very strong utility market as we move forward as well as the new growth opportunities, whether that is some of the services and/or the ag tech that we're bringing in there. And that's why we have confidence in the 12%.

Great. Rick, I'm going to direct this next question to you. This is from Jon Braatz of Kansas City Capital. It's surprising that there is so much steel that is not currently galvanized. Do you think ESG could drive accelerated organic growth? And is there any industry need for new galvanizing capacity?

Well, that's a great question because ESG should be an excellent driver for hot-dip galvanized product and requirements as the focus is on life cycle costing for the product as opposed to low cost. So yes, we think that could be a great driver for our business and for the industry. And as far as capacity, there is certainly significant capacity available now just based on what has been built over the years, and it could require more.

Excellent. Joe, I'm going to direct this next question to you. This is from William Blair. You mentioned in your presentation that you are working to develop a more standardized product offering in the telecommunications business. Generally, when we think of less customization, we tend to maybe think that, that could lead to lower margins. So maybe talk a little bit about how you expect telecom margins to trend given this new strategy.

Thanks, Renee. When we come to moving the business from an engineer-to-order to configure-to-order business, the focus really is on the front-end work that we do on these projects. They're very custom. So the amount of engineering project administrator's times and drafters is extensive. So moving forward, once we do make this transition, we expect our margins to improve, and that would be going forward for a 3- to 5-year range.

Excellent. Thank you. Steve, maybe back to you, and I've actually had several questions around this, so we can kind of answer a few of them maybe in one. Could you maybe talk a little bit -- thinking back to Prospera and the acquisition, talk a little bit about what we expect for revenues -- revenue run rates and how we see them as part of our 3- to 5-year outlook.

Sure. So when we acquired Prospera, as you do whenever a venture capital firm or start-up company is bought, there's not that much in the way of significant revenues. It's really about the upside potential that we see. And in the first session, we talked about seeing growth rates of about 40% on our business that is recurring, of which half of our technology sales and irrigation fit in that category. And so that 40% compounded will be a very compelling growth story. Obviously, the margins on these products are significantly higher than anything in our portfolio today. And so if I was thinking about Prospera in a few years and what that means for us is we will be in the hundreds of millions of dollars if you just build this out over the next 3 to 5 years.

Excellent. Avner, switching over to you. I have a question that's -- it's great to see our target of 7% to 12% revenue growth. Can you maybe talk a little bit about what the organic growth is implied within that range? And how should we think about growth in terms of volume versus price in lieu -- or in light of the potential inflation that we might see in the future.

When you look at the range, the 7%, the lower part of the range would really be the organic and get to the 12% would be with acquisitions. When you look at inflation, we're factoring typical inflation around the 3%, so not the hyperinflation environment we're seeing today but more back to historical levels of around 3%.

Okay. Diane, a question for you. What percentage of your facilities do you consider to be best-in-class already and a model for your proof-of-concept pyramid?

Well, thanks for the question, Renee. At this point, none of our sites have actually reached the pinnacle of proof of concept, but we expect several of the sites to -- in the next couple of years, be at that proof-of-concept level, but all of the sites moving up the maturity continuum.

All right. Thank you. I'm actually going to bring back Chris for this next question. You could come over. Thank you. So Chris, in the Utility segment, you're assuming a 3- to 5-year market growth of about 7% with the Valmont target to grow over 8%. What are your assumptions for transmission, distribution and substation, both market and Valmont growth?

Okay. Thanks, Renee, and thanks for the question. So the market growth rate for the TD&S segment is about 3.5%. And we, in our portion of that business, expect to grow at more than double that. So at least 7% to 8% and more.

Rick, one back to you. In the Coatings segment, are there any initiatives that you are pursuing or potential secular drivers that you see might expand your addressable markets or industries from what you've traditionally served?

Well, we're always looking at opportunities to expand markets outside of hot-dip galvanizing with applied coatings but especially with value-added services. And we feel that, that can be a driver globally for us as we're looking at expanding from the traditional markets we have looked at.

Great. Thank you. Joe, this is a question from Brent Thielman with D.A. Davidson. How will acquisitions play a future role in the telecommunications business? And there's kind of a follow-on, which is do you offer the full suite of products that your customers want today? Would acquisitions be a practical way to develop new customer relationships that you may not have right now?

Thanks, Renee. Certainly, mergers and acquisitions would be an important part of our growth strategy moving forward. And I don't think either of the examples is mutually exclusive in that a potential target could offer better capabilities than we have -- capabilities that we don't have today, maybe a product line that's more focused on technology than what we're offering. And then secondly, a market share acquisition, especially in the international businesses would make sense for us, too, going forward.

Great. Thank you. Lennie, I'm going to call you back to take a follow-up question from your presentation, and this is from Jon Braatz with Kansas City Capital. Can you talk a little bit about the return on investment opportunity for solar development on the farm? And expand maybe a little bit on how that whole investment model works both in North America and also internationally?

Yes, a little bit more about that than was in the presentation. The example I showed was in Brazil, and these are usually less than 1-megawatt projects, small agricultural type things is what I'm referring to here. And as I pointed out, the payback there was 5, 5.5 years, and it has a lot to do with power availability in this particular case and in the cost. As we bring that to North America, we believe there are opportunities here, but it maybe isn't quite the same as what I just described. But one example, maybe in Arizona and Nevada, where we have a large number of pivots that run over 2,000 hours a year, the application of solar to that particular event and the paybacks that go with that might make it very compelling. Others may be more of -- it's not so much a payback, but it's an ESG play that goes with this as growers move forward. So it depends, and it also depends on cost of power. Here in Nebraska, power is relatively expensive. So do our growers necessarily would look at that here? Maybe, maybe not, but that would play in. But on a global scale, the example would be where we're taking this as well is does that -- to our [indiscernible] account in Sudan, big opportunities there as they look to put power in and infrastructure in. It can cost $1 million a mile to bring the grid to where some of these farms and things are. And in that particular case, the solar application has tremendous payback. And we already have couple of examples of that going on in that region as we speak.

Great. Thank you. Avner, I'm going to shift over to you. Maybe talk a little bit about your finance transformation. Specifically, what margin improvement do you expect from some of the actions that you have taken and where you see other opportunities for savings or scalability?

Thanks, Renee. So the way I look at the finance transformation, really, the finance transformation is a key enabler for us to achieve our strategic goals and our financial targets over the next 3 to 5 years. So if you look at that profit bridge, which I shared earlier today, which gets us from 9.3% to 12-plus percent, each 1 of our 3 pillars of enhanced business partnership, our centers of excellence, shared services, all of them help us achieve each one of these areas on this bridge. So as an example, if you look at pricing over inflation through our business partnership, through our centers of excellence, we provide analytics, predictive analytics, real-time data to help drive pricing decision. So for instance, just 1% of price increase can generate close to 100 basis points. I gave an example about the product line optimization for the ROIC improvement, well that would apply to our profitability as well. Finance will support growth through identifying and supporting additional regions, products, et cetera, and through our treasury center of excellence where we can provide some trade finance and really help to generate additional leads and business. And finally, for the cost reduction, help with decisions on investments to get the best ROI and profitability going forward to support many of the initiatives that you heard earlier today on the manufacturing side that Diane shared, Aaron shared some additional. So finance will really be integral for the company to help us get to our goals of 12-plus percent of operating profit.

Great. Thank you. Tim, going to ask a question of you. You talked quite a bit about smart city and the opportunities that we have there and most likely the need for partnerships to move that forward. How do you see -- how do you plan to monetize smart city infrastructure? And how do you see these partnerships helping you to achieve that?

Yes. Thank you, Renee. Aaron talked about it earlier. There's a large ecosystem, lots of use cases. So what you're seeing is there isn't just one business model here. There's multiple business models. Some of them are recurring revenue, some of them are onetime. So I would love to state that there's just one simple model. But as Aaron described the stack, all the way from the structure up to the aggregation and the customer portal, we'll have different models. And what we're really focused on is ensuring that the ecosystem can have success. Today, once again, with its fragmentation, we see winners and losers. And as we drive the digital gateway, it's important that the ecosystem is successful, and that will actually enable all players to have a degree of profitability.

Excellent. Thank you. Rick, back over to you. I had a couple of questions around consolidation in the coatings market. We've obviously seen a fair amount of consolidation up to this point. Do you see other opportunities for further consolidation? And related to that, potential margin improvement opportunities.

Great question, Renee. We do believe that industry consolidation is going to continue and that there's opportunities globally. And over time, we've seen that our operations and coatings operations tend to leverage as volumes go up. So we believe there will be improved margins as the industry continues to consolidate.

Excellent. Maybe as a follow-up, and this is from Brent Thielman with D.A. Davidson, is there any initiatives you're pursuing or secular drivers that might help expand your addressable market?

We will continue to expand our addressable market by really reaching out to the customers and identifying the services they need. So value-added services is going to be the big driver for looking for additional opportunities beyond galvanizing, beyond powder coating, beyond E-Coating to truly expand our markets and providing those solutions will actually expand the market that way.

Great. Thank you. Avner, another question for you, and this is from Brian Drab at William Blair. Given the strong and improving end markets and some of the very good pricing activity that we've had across our businesses to help offset some of the steel price or steel cost increases that we've seen to date, do you see any reason why each quarter for the rest of this year would be below $2.50 in EPS? And maybe just talk about what we might see in terms of potential risks or headwinds to that.

Thanks. Well, so first of all, let me start off by, not all our quarters are equal. As an example, Irrigation, we do know that third quarter, just based on seasonality, they won't be as strong as we've seen in Q1. And there's still some uncertainty. I mean there's the material environment, there's still inflationary environment. It has not stabilized yet, so there's still uncertainty there. And finally, COVID in Southeast Asia is still a risk. So overall, we feel very confident and there's still a lot of opportunities, and we're really happy with our results so far this year, but there's still uncertainty, and that's why we provided the current guidance.

Thank you. I've got another one for Lennie. Lennie, if you want to step back, and this is also from Brian Drab at William Blair. At your last Analyst Day or Investor Day, you talked about your water management business growing to around $100 million within a few years. How do you feel about where that growth has gone and maybe comment a little bit on the opportunity going forward as well.

Okay. Yes, as it relates to last Investor Day, that kind of was our forward-looking forecast. I'd say we haven't achieved that yet. We're directionally moving that direction, but I wouldn't say we're quite to that level at this point in time. Part of the issue is some of that, it's a global business, and a lot of that was based on some large projects that we hope to have captured that maybe haven't come our way to the degree that we had originally thought. So again, it's a business we continue to believe in. And the projects and things that we work on, water technology, design, pump stations, all that stuff is a part of this. And so to be a part of that solution is something we think we bring to the table. And it's just a matter of hitting on a few more of those than we have at this point. We also have a new leader in that area that spends full time on this business. And so I feel directionally, $100 million, we will be close here in the next year or 2. And so we're lagging a bit behind what we would have said in last Investor Day but still believe in what we're doing and what we're trying to bring to the sales process as it relates to larger projects.

Thank you. Another one for you, Avner. Great to see that you've set new 3- to 5-year financial targets. What -- how do you feel about your confidence level of being able to achieve those targets maybe by year 3 instead of by year 5? Maybe some of the puts and takes there?

Okay. So let me start off by we're very confident we can achieve these goals as we outline them between 3 to 5 years. So to achieve them quicker, say, 3 years, if we have stronger multiyear cycle with irrigation, that could provide additional tailwinds, 5G, stronger than we're currently predicting, providing additional upside for telecom, and infrastructure bill in several countries, items such as those will definitely help us accelerate our targets to year 3, but that would be dependent on kind of the strength in the markets.

Great. Thank you. Okay. Well, that brings us to the end of our question-and-answer session. I'm going to turn it over to Steve maybe for just some final comments before I close us out for the day.

Thank you, Renee. As you've heard from many of the business leaders, there are some very substantial tailwinds to our businesses. We've set ourselves up for growth very well in terms of the products and services that we're offering. People have paid attention to the macro environment around inflation, and we've been able, through pricing, to be in a very good position to handle those kinds of headwinds that are coming at the business. And lastly, I really believe that our strategy will take us forward. And the confidence that we have in our goals is very strong, and it comes down to execution. It comes down to some of our assumptions, obviously. But we're in a very good spot to capture the agricultural and infrastructure macro environment that exists there today. With that, I'd also like to thank Renee and the Investor Relations team as well as our production team for helping us with this event.

Thank you, Steve, and thank you, everyone, again, for joining us today. We look forward to speaking with you again very soon, and a reminder that there will be a full replay available of all of the presentations and the question-and-answer sessions available on our website for the next several months. Thank you.