Good afternoon, everyone. Thanks for taking the time. We're gonna kick things off here again. So I think we are live online again here. So, with that said, we're joined with the Gibraltar team here. Do you guys—I mean, look, in terms of kicking this off, you know, obviously it's a great platform here to have you guys online, in the room. Do you wanna make any opening comments or remarks? I know we've chatted here of late, but, there's probably a number of different things coming out of the third quarter. There's a lot of different commentary from across the industry in recent weeks that we could go over.
I've certainly got a list of questions for you guys, but considering the wider audience here, do you have anything that you guys wanna share at the outset here? And again, thank you everyone for taking the time.
I would suggest we just jump right in.
All right, let's do it. So, here, how about this? I'm gonna, I'm gonna frame it this way. You know, in totality, third quarter was a bit choppy, right, for the, the, the whole space, right? And, you know, in terms of looking at, the tracker space and looking at just what's happened, across solar delays, you know, I'd love to get your perspective here on, on what, what are you seeing out there in terms of execution and ability to get, you know, projects done on a timely basis, and just visibility on the business, right? I think that's the core question that, that a lot of, you know, utility scale has been dealing with of late, and maybe that's just the right place to start here, if that makes sense.
Yeah, no, it's a good question. So probably the most difficult thing we've had is trying to understand exactly when the revenue would flow. So it's not the contracts being signed, it's not the backlog, and our backlog only has in it signed contracts. It's not getting the deposits from customers. It's actually timing it up with when the revenue will start to flow in a given quarter. Historically, if you looked at projects in general, about 10% of those projects would float from one quarter to the next. That goes back since the beginning of the industry. This year, that really popped up to around 20%-25%, which was the surprise. And you say, "Well, what's changed?" And for our customers, the majority of the reasoning for that is around permitting.
And I think that's a function of, if you think about what we do, we have, you know, 400 or 500 projects a year. We've got 250, 300 at any one time, always active. So we're in a lot of remote locations, and you're dealing with local government offices that you're trying to get permitting from, whether it's city or county or state or otherwise. And so it really comes down to one project at a time, and it felt like when the industry kind of stopped or slowed down significantly, yeah, you had a lot of projects that were still flowing into the ground, but a lot of that had been permitted and approved some time before.
There weren't a lot of new projects or near as many new projects being permitted up front that would go into, into the ground, now or, or later. So I do think it's been overwhelming for a lot of local, communities to get that permitting up and running. These are also offices that were five days a week, that probably are remote somewhat now. They're also permitting for every project in their community, not just solar. It's everything residential, everything commercial. And I do think that's, that's been part of the challenge, and that's probably been our biggest frustration that our customers have had, is just that. Now, what I would tell you is, what we've seen recently is that percentage has started to come back down a little bit. So that's good.
It tells us that some of our projects, at least, are getting through the pipeline and hopefully, that will be more indicative of what you'll see going forward. But on a year-over-year basis going forward, if you know it's gonna be 20%, then you plan on that, so you don't have the surprises. The difference this year for us was we never saw anything more than 10. It spiked to 20% to 25%, and that translated itself into, "Hey, we saw revenue move from one quarter to the next." You shouldn't see that next year if you're basing it off of 20 versus 10. So that's been the, probably the biggest delay issue.
It really hasn't been panels most recently, and it really hasn't been interconnection most recently, and we haven't seen a lot of cancellations or customers holding back because of financing or anything of that nature. I know there's a lot of noise out there-
Yeah.
I suspect a lot of that is out there, and it comes down to every individual project. So we've been fortunate so far, where that's not been a big driver of the business.
Yeah. Bill, maybe just to keep going with that in brief here, it sounds like you feel somewhat calm about some of the issues. I mean, you're citing, "Hey, look, permitting issues are still real," and again, they're not going away. They're somewhat pervasive. Just endemic, right? Maybe this is a better word to be using here. But it sounds like you feel relatively calm about those that have been identified and having a certain, you know, adjusting for a certain cadence of them.
You wanna talk a little bit more about how you think about the next couple of years and the visibility and kind of adjusting for, and having a sense of confidence of, you know, what you have kind of visibility on and backlog and otherwise is gonna materialize on schedule, or having handicapped and moved your schedules accordingly to adjust, adjust to that?
Yeah, we think next year is gonna be, I think, very solid. Our backlog supports that. It's been growing for the last couple of quarters and we anticipate that to continue as we feed into the year. Now, our timeline from the time we sign a contract to completing that project tends to be between three to 9 months. So, you know, the beauty of our business is we have a very short window where we can see from order to execution being done in a very short period of time. So our backlog, as it builds in a given year, gives us really good insight that year, plus the following year, and that's about as far out as we see. That's the C&I space.
But in general, I would say our customers, despite all the nuances of, and headwinds that we've all been dealing with, ultimately it still comes back to, is your backlog growing or not? If it is, then your customers are gonna plow through and continue to plow through. And again, our customers, there's no reason to issue a contract with us and give us a deposit unless you're gonna move forward, right? There's no incentive to do that anymore, and you won't do that unless you have permits in place, most likely have them in place and a panel in hand. And, you know, you didn't have to worry about that two or three years ago like you do now. So I think, you know, we feel very optimistic about 2024 and, and, and plowing into 2025.
You know, all indications are that as of today.
Yeah. In fact, that's sort of the. I, I just want to make light of a point you just made there about, you know, the cost of financing in this environment literally incentivizes folks to really give you real and valid projects and almost disincentivizes anything that isn't real, not gonna go from reaching into your backlog, if you will.
Yeah, it's absolutely true, and that's one reason, guys, we never count anything in our backlog outside of a signed contract. Never have, never will, because we've been in this space as a public company for eight years. Anyone that's been around solar, you know the roller coaster that we've all dealt with. We made a decision day one, nothing goes in our backlog unless it's a signed contract, 'cause it's real, and then nothing becomes real unless you're able to deal with the variables that are on top of you at that time. And that is important. It's true visibility, is the way we look at it. And I think that makes sense of the way to run the business.
Yeah, absolutely. Well, let's talk about this. Actually, in terms of having visibility on projects, I mean, not all of your peers in the solar space use such a vigorous definition of what's in their "backlog," as you know. But with that said, I'm sort of curious if I can use the broader term of "pipeline," you know, something that might be more tantamount to some others out there. How do you think about that evolution and that, you know, the longer term visibility that's showing up, whether, you know, whatever term of art you want to put to it?
No, it's, it's a good question. Everything that's not in a contract, we put in our funnel, and we-
Yeah
Gauge our funnel through seven stages. It's not rocket science, but that funnel is as robust as it's ever been as well. On one hand is getting those contracts. The second thing is that funnel. When you look inside the funnel, how much of that is your existing customers that are continuing to invest and drive more fields in place and so forth? That gives you an idea of how your customer base can deal with some of the variables that we're dealing with. And then there's the new customer base that you're trying to get as well, and how long have they been in this space, and what's their capability? So, that's very robust. Our backlog grew 13% last quarter. So, you know, I think that points to some pretty solid outlook for us.
I think the funnel will continue to grow and yeah, I won't quote you a number on it, 'cause everyone else in the industry does that for us. So, I'll just say it's very attractive.
Got it. How do you guys think about growth over the next couple of years? I know you guys have a few different metrics out there, I think, for 2025, but you want to talk about kind of the growth of the industry and how you guys are keeping up. Maybe might talk towards, like, market share, maybe as well.
Yeah. So, prior to UFLPA, DOC, and all the other fun stuff, we were averaging between 18%-19% per year for the previous five or six years. So pretty good track record, organically growing the business. And really, the swim lane's been the C&I space, and we think there's a lot of runway still there. And I think the C&I space has grown, depending on, you know, looking at industry published information, a little bit faster, actually, than the total market. Now, I know that ebbs and flows in a given year, but over a period of five years, I think the U.S. market is pegged somewhere around 15%-16%. So I think C&I is a good space to be in. We are a leader in that space.
When we acquired Terrasmart with our business RBI, we were the top two players in C&I, and our idea behind that was to own that space and to build a portfolio in that space. And if you think about that space versus utility, it's a little bit different, as you guys probably know better than I. But ultimate, end of the day, we want to design for you on a piece of land, a return profile, and we're going to manufacture whatever it is you need. We don't actually sell what we make. We sell what gives you the best return. But what we make happens to be a combination of fixed tilt, multiple tracker solutions, two different foundations, an Ebos solution, and as a separate business, we have a canopy group.
So if you're thinking about a piece of land, the combination of fixed t ilt, tracker, Ebos, whatever foundation you want, works for us. And we give you a price. And ultimately, end of the day, that's the selling pitch, and that's worked pretty well for us. And then we're going to do the install. The install side, you might think that that's pretty basic, and in some ways it can be, but when you get into C&I, particularly in some unique spaces, a lot of people may not understand, we have built a business around autonomous vehicles and so forth, that actually do the install, help us with the install.
So our ability to do it correctly, the right way, the first time in very extreme conditions, whether it's lava in Hawaii or sand in the Caribbean or the side of a mountain, doesn't matter to us. We know how to do that quite well, and we've done about 3,000 fields the last five years. So we've seen about anything you can see in the field. But that piece is where you can make a lot of money, but you can also have a problem if you don't do it right. But when we looked at this space, we said: What do we need to manufacture? Well, first of all, what do we need to design and help our customers with, determine what do we need to manufacture, what product portfolio, and then what's our installation capability need to be?
If you look at that entire spectrum, what you'll find is a revenue and a profit pool we felt that was pretty attractive for us to go participate in and be closer to the people that are actually writing the check. And for us, that's a business, part of our business model we really like. We want to be held accountable, but we want to be right there with the person writing the check that's going to own or operate that field. And so that's the way we built our portfolio. The key for us, I think, going forward, is... You know, our Ebos business continues to grow quite well. Ebos, in the world of C&I, doesn't exist from a manufactured perspective. What exists is individual electricians pulling wires and making connections on site, which no one really likes.
But if we're already on site with the labor, doing the foundation, the post, the racking, it makes sense for us to do the EBOS at the same time, right? You think that'd be pretty simple, and, and technically, it very, it very much is. The issue is you've got to set up your building, your business processes to deal with 500 projects a year, not 25. So that ripples all the way through project estimating, manufacturing, and then field installation. We're figuring out how to crack that code so we can actually bring an EBOS solution into the C&I space, which has never been done before, which is great. And parallel to that, we continue to grow our utility-focused EBOS business as well. So there's some really interesting things, I think, for us, that are unique.
If we can just teach customers to buy both things from us, because we've trained customers for 10, 15 years to not. But now there's a value proposition that's never existed before, 'cause we're the only ones in the world that actually have that. So it's up to us to do something with it, and we're working that pretty hard. So, you know, that gives us also a lot of confidence around how we're gonna drive the business going forward.
Do you wanna talk a little bit about the landscape and how that's changing? I know we chatted a few months ago about, you know, the various players, where they stand, your position within it. You talked about like, for instance, C&I, and, you know, you like that end market. It seems to be doing relatively well, right, at the end of the day-
Yeah.
Speaking of which. But you want to talk about the, the overall landscape? I figure. Let's pull back quickly. Talk about the landscape, where you guys see yourselves, where you guys continue to see yourselves, right? If you wanna, like, frame it out that way.
Yeah, so C&I has been our swim lane, and people ask us all the time, "Do you do any utility?" And I think that depends how you define it. So our average project size is 8 MW MW-10 MW.
Mm-hmm.
We're doing anything from 3 MW to 100 MW and everything in between. So you could argue anything above 20 MW, we're in utility. Well, if that's the case, we've been in it for some time.
Right.
That's becoming a bigger piece of what we do. The difference is, in a traditional utility project, an EPC is gonna actually do a lot of the install. Our customers are asking us to take that on. So that's a, that's a value proposition you tend not to see in large projects that we're actually getting access to, and I think that's important to us. It's not ultimately a showstopper if we don't get it, because really, for us, utility is relatively easy. It's just material and shipping to site, and you're done, and we, we can do that all day. That's not that big of a deal. The reason we haven't been doing it is because we were growing so quickly for five or six years, we couldn't keep up.
So yes, our customers have been started out mainly as C&I, but you'll find a lot of our customers now are doing 20 MW, 30 MW, 50 MW, 100 MW. That's just them, you know, having a runway for themselves and pulling us along with them and, and us providing the same solution set. So that's how we'll get pulled into bigger projects. That's how it's actually happening. We're not necessarily looking to go bang heads on a 400 MW project for a cents per watt, you know, negotiation. We're gonna go where we think we have value, that we can get paid for appropriately, and we'll do our job. I will tell you up front, I'm more interested in profit share than I am market share.
They're not, you know, independent of each other per se, but I think at the end of the day, for us to grow the business, we've got to drive margins so we can invest accordingly, and so we're gonna pick and choose where people value us. There's enough room to do that, and we'll make the investments we need to continue to expand into other segments where maybe we haven't been in the past. So, you know, I think the other way of...
You know, for people trying to come our direction, it's a little bit different because again, you've got to have a different set of business systems and processes to deal with a fragmented customer base, with a lot of different locations that you have to go into and be successful, and you have to bring to the table an installation capability as well. And that's where I think a lot of the utility guys have tried. They dipped their toe in this. This is not new. I mean, it's cycled through it over the last 10, 15 years. They've come in and come out because it's hard. It's hard because everything from estimating all the way through has now got to be not 25 projects a year, but 10 a week.
That's a whole different DNA, and your business has to be capable of doing it. So that's why we stay in our space, and you'll see us creep up more into some of the bigger pieces as they present themselves.
Now, look, I think in parallel, we've also discussed this in recent months, but I think it's worth hitting squarely. You know, there's been a big debate, especially through third quarter, about like, the margin potential of this business, right? Like, and perhaps happen to be differing views about this. How do you think about this? Especially because, as you say, you swim in a slightly different lane than some of the other, should we call it, bigger peers out there. But you guys deliver pretty healthy, and I don't think you talk about low—this as a necessarily low-margin business. Love to hear how you think about it.
Yeah, so you know, the last two quarters, we've had down sales, while our bookings have gone up, but our margin profile has improved into double-digit range, and we said by 2025, we'll be at 15% operating income, about 17% EBITDA. Feel really good about that. I guess my point to everybody is, in the world of C&I, what it affords you is an opportunity to create more levers across your business to manage your margin accordingly, and if you don't identify those, then I think you're in trouble. If you depend on volume, then you probably should, you know, get out of the business. Volume helps, but when you think about the way we built the portfolio, there's a manufacturing and a supply chain aspect that has within it a cost structure and opportunity to always get better.
You have the field installation, has the same kind of thing. If you have the same discipline in that portion of your business, which is 40% of the revenue and profitability opportunity that you do in manufacturing, you can really do well in this space as well. So those are sets of levers that go in two different aspects of our business, that if you layer that in with business mix, product mix, new products, you can see where the levers for profitability, particularly the gross margin line, really start to show themselves as being potential opportunities, and that's ultimately what drives our SG&A. So the best thing that's happened to this industry is the three or four worst things that could have happened to this industry the last three years, which is it forced us to question every paradigm about how we're doing business.
I don't say that lightly. I mean, tearing it down and starting from scratch about how you're going to conduct business and the capabilities you have to have in place, and your mentality about how you're going to price for the value you create. And more importantly, what value are you truly creating? This industry has never had a headwind until 2020. Think about it. Benefits galore. The price of solar, the cost of solar went down over a 10-year period when we had huge duties on the most expensive panel. Never had a headwind in 10 years, and all of a sudden, overnight, inflation blows everybody up, interest rates blows everybody up, UFLPA blows everybody up, DOC investigation blows everybody up, right? Anything else? Anyone want to add anything? You know, interconnection, let's throw it in there, right?
So look, we can all cry about it, but at the end of the day, you can also look back and go, "All right, well, what are we going to do different?" When I came into this business, I felt as if the leverage was such that everything rolled downhill, and if it was crappy up here, it was really crappy where we were.
Mm-hmm.
That's the way contracts were lined up. That's the way risk was mitigated and so forth, and we needed to change that, and I think this has been helpful in that process to challenge the paradigms. Those are tough conversations. Not every customer loves you when you have them, but at the end of the day, they do need us. We have to be around, and I think people do understand it and do think the stronger are going to get stronger, and those that don't take advantage of it won't. But I do think it's a healthy thing that the... In hindsight, going back over this, we'll look back and go, "It was a healthy thing that it happened." It's unfortunate because a lot of it's self-inflicted, but at the end of the day, it was probably necessary at some point.
Actually, Bill, to that point, what, what do you need to see to get to that, that 25 target, that 17% EBIT margin? That's a, that's a nice place to be. What do you need to get done within the business? What kind of volume, SG&A? What, what are the different parameters, right? You talked about being in a healthier place today. What needs to happen?
So, you know, I said earlier we have two big chunks of leverage, whether it's in the manufacturing supply chain or the field installation aspect of the business, and we've worked really hard on both. When inflation went through the roof, you saw some people get hurt pretty hard with contracts because where steel had moved, et cetera. We've been in and around steel and aluminum since 1973. We watch it daily. It's in our blood. We always have, across all of Gibraltar, not just this business. So that was not actually our big exposure. Our big exposure was when panels couldn't show up, when people thought our field installation, part of the business, really was challenged.
We were deploying crews everywhere, and stuff wasn't showing up, and so we had a lot of extra costs, and that really hurt us for a couple of quarters until we kind of fixed that. And that's really important to note, because if you look at the last couple of quarters where we're running 14%, 15% operating income, how'd you do that if your sales were down 20% year-over-year? And a lot of that is because those levers across each of those two big buckets were really starting to pay off for us. So that's kind of some context.
As you think about volume coming back, I would say, you know, getting to the profit levels that we're expecting to get to in 2025 are very much achievable, and I'm even more confident today than I was a couple of years ago because of the work that's been done to get us there. On the volume side, I think we just we don't need any more surprises, you know, that's gonna stymie our customers from being able to execute what they would like to do. And if they do that, we have the capacity and the ability to get there. It's just a matter of them, you know, some of the handcuffs coming off of them so they can get going and, you know, permitting is one of those and so on and so forth.
But, yeah, we feel like it's still a pretty solid plan by 2025.
Right. And just to make sure I understood your, your term of art here, you know, co-permitting, does that need to improve here? I mean, or you kind of—you feel like in a pretty good place in terms of the because I understand that backlog doesn't necessarily stretch all the way out. You don't have perfect visibility to 25, but at least at the current, quote-unquote, "close rate" or what have you, to kind of capture the current cadence here through that filter, you feel pretty good about being within that line of sight of 17. Is that the way to interpret that?
Yeah.
Or do you need-
Yeah.
Do you need improvement on permitting?
No, we feel pretty good about our line of sight, based on what we're demonstrating today, particularly in a down sales environment.
So if I can pivot, I know we've talked about this a little bit in the past, Ebos, right? In fact, let me put it this way: There is a certain level of excitement across the space about, you know, adjacencies and trying to sort of strategically pivot with it, you know, to take advantage of the totality of the solar build, from companies like your own, to sort of maximize the value proposition. How much of the solar install value can I capture-
Right
... if that's a way to say it? How do you guys think about tackling that? I understand that you guys already are non-trivially exposed, but, you know, as you think about kind of really leaning into this business and the business model and how you wanna, you know, be involved in the space or the-
Yeah, so-
Scope
... as I was, we were speaking with the group earlier, the, when we looked at this industry to start with, the first thing we always do is we have a rubric we take ourselves through. It's kind of 50 metrics around the industry itself, and it has everything to do with structure and competition and customers and profitability and a whole host of other risk and things of that nature. Obviously, the risk part we didn't see as clearly as we would have hoped, but relative to the last couple of years. But in general, it's a really good space, but part of the exercise is then map the entire profitability and revenue streams that, you know, come with the industry. So we've designed our portfolio around getting at what we thought was the right-...
chunk of opportunity to go after, where we thought we could differentiate ourselves and bring value that others could not, to the same degree. And for us, that required us to do some things with our core business as well as acquire Terrasmart, which we did. And then when things hit, really back to my point of challenging paradigms and so forth, to get the business to be more scalable. I think what we learned was what was and was not scalable at the time, that we were going seven days a week, and we've really addressed that the last couple of years. So, I think about the profit pool that exists across what we do today is something that we still have a lot of runway with.
I mentioned earlier, if you think about the Ebos-type solution set that goes into C&I today, that's probably a $200+ million market at a minimum, that today is untapped. We're going to go crack that nut. We're the only ones that really have the opportunity to do that in some respects, and the reason is, is because it's not the technology, it's the business systems that allow you to deal with smaller projects, 10 a week, and get out and install and leverage the crew that's already there, putting the foundations, the post, and the racking in place. Nobody else has that. So that, that opportunity is there for us, and we want to own that. Clearly, we want to continue to grow in the utility as well with, with EBOS.
But the next step is, if you think about foundations, racking, tracker, and Ebos, what that lends itself to is an O&M world that we may be in a much better position to go into than we would have a few years ago as well. And that's a space that I'm quite familiar with personally and spent a decade of my career in another industry, very similar, doing this. And we've got a number of people on board now that have been in this space as well. And so look to us to kind of think about that as another piece of the profit and revenue pool that we will approach down the road. But right now, the industry is not necessarily ready for that, and it will be.
When you say, you know, down the road, I don't mean to put words in your mouth too much, but 25 seems like this is the near-term focus. That's the near-term focus or medium-term focus. Down the road is after 25, to interpret that? I mean, again, I get that you can set things up. You see line of sight of how you want to build a business. Is that fair?
Yeah, I think it is. You know, we have plenty of work to do between now and then, and you know, getting into O&M, as an example, you could do that a couple different ways. But there's certain domain expertise you have to have in place, and you have to have a certain infrastructure to deliver that value proposition that needs to be put in place for that to be something that's scalable and you can make money doing it. The concept of O&M for what we're talking about is not rocket science. Again, it's not. It's actually more of a commercial issue than it is a technical issue. But there are some building blocks you have to have in place, and for us, I think we're putting those in place.
That will make sense for us, and we'll turn it on when we think it makes sense. And it'll be a customer at a time, because not every customer is going to feel the need for someone to help them manage something that they recently bought. That's just the way it is. I don't know how many of you do preventative care for yourselves, or do you go to the doctor when you get sick? That's the concept. Most people react when they get sick. That's exactly how an owner-operator works with these fields as well. So there needs to be a little bit of a pain absorbed before people understand the value of what O&M can bring to the table.
But the way that you bring it to the table matters, because you can do this a lot of different ways, and most of them are not scalable, where you can make money doing it long term.
Nice. How do you think about, you know, sort of when you think about the balance sheet metrics improving as a consequence... I'm going to try to frame it this way. So moving down the income statement, having that kind of a healthy EBITDA margin return, then in turn, it affords you a certain level of latitude from a balance sheet perspective and cash flow to lean into this opportunity as well, right? I suppose that's part and parcel of this. I'm looking a little at Tim's direction, if he wants to chime in, but why don't you run with it in that regard?
I would say, we don't feel capital constrained at all today.
Yeah.
We're not capital constrained today. I think we ended the quarter $85 million in cash in an undrawn $400 million revolver. You know, so that's today, even our balance sheet really isn't an issue for us.
Perhaps if I can clarify, it gives you, it really affords you a lot of latitude prospectively. That's kind of what I'm-
Yeah.
-thinking about is-
Yeah.
-cap allocation.
If you think about our capital allocation across all of Gibraltar, we're pretty asset light. So less than 2% of revenue on CapEx, generally what we spend, $20 million, maybe a year. We did a stock buyback we initiated about a year ago. It's a $200 million, three-year authorization. We spent about $110 million of that. We're not committed to spending the rest. We'll spend the rest opportunistically if we see the need. But our focus really is to grow through M&A. Not specifically solar only, but our whole portfolio, right? There's in each of our businesses, we think we see opportunities where we can expand what we do for our customers in a meaningful way.
And I would add, you know, our. We generate a lot of cash. In the last three years, having the rest of portfolio has really been helpful because we actually have invested pretty heavily into our renewables business with talent, systems. You know, I mentioned earlier, our equipment that we use for installation, there's a lot of autonomous vehicles associated with that. I mean, there's a lot of things that needed to be done that we've done, and we'll continue to plow forward. But part of the reason we're able to do that is we had, you know, the rest of the portfolio really, you know, churn in pretty well. Yeah, we're in pretty good shape to be able to move forward on about anything we see makes sense.
... I mean, how do you see—I mean, just to kind of come back to that on M&A, I mean, building out the renewable business is still the focus when you think about that? Or you like other adjacencies and other sort of verticals?
Yeah, I would, I would say, we have four segments. So renewables, residential is our biggest segment. Clearly a lot of opportunity there.
Mm-hmm.
Our Ag tech segment, there could be opportunities there in the future. Probably nothing today. When we look at our renewables segment today, it's unclear what we need to continue to grow at a pretty good pace and generate a lot of cash.
Right. You've got-
So what we do, keep our eyes open, we look at it. Bill mentioned O&M.
Mm-hmm.
A way to get into the O&M business is to buy in. But to Bill's other point about O&M, you know, the industry hasn't yet really adopted O&M in a meaningful way, in a way that's interesting to us yet. So there's O&M companies that cut grass. That's not what we wanna do. You know, we don't wanna go out with window washing equipment and robots and clean panels. You know, it's the remote monitoring and addressing the issues as they arise, the challenges. Until there's enough scale of people doing that, I think the companies that are out there doing that privately held, we've seen many of them, they're sort of subscale at this point.
Yeah, I mean, we've kept an eye on everybody. Look, the multiples were extraordinarily high. They didn't need to be, and they've come down dramatically, so we've been patient there, particularly for the newness of a lot of these businesses that weren't making a lot of money. I think the other thing we said up front to everybody is, "Look, our role, our goal here in the next, you know, 12, 18 months," going back that time period, "is we gotta get our renewables business right." We're in the middle of a pretty strong macroeconomic set of headwinds, and I just wasn't comfortable that our investor base would feel great about us going out and doubling down on some more stuff in the middle of a lot of unknowns.
So we said, "Hey, let's hone in on getting the core business right and let these valuations kind of settle in. We're here for the long term, so no reason to jump." And there's a lot of... I'd say, a lot of stupid money floating around on some... A lot of shiny toys floating around that weren't so shiny, and so we decided that we would hold tight until we saw things evolve.
And, sorry to keep going on this, but just to continue with that, the metaphor here. Things haven't necessarily percolated back to more reasonable levels. I mean, we haven't quite seen that, the flip side of this, of some sort of quasi-distressed environment where you can pick things up quite yet. I take it, right? Maybe that's coming, but you're not quite there yet.
Yeah, well, I mean, we're not necessarily looking for something distressed as much as just something that's not so incredibly overvalued that-
Right.
You can get a return for shareholders. But, you know, multiples in the 40s and 50s on companies that never had made any money, that's a tough sell to your investor base when, you know, you've got all these headwinds we just talked about. So it's just, you know, it's being patient. It's a long game for us. We got in this for a reason. We're not here to flip it. We've been in it for eight years as a public company, longest standing probably in the industry. So, you know, we will be surgical about what we're going to do. And, you know, the key is, at the end of the day, you know, you've got to deliver. And that's what I think people inherently are looking for. So that's my first priority, period.
Absolutely. Maybe to just pick up on the last comment a little bit further, if you don't mind, going back to Tim. You talked a little bit about buyback and again, I like dare bring it up. You have remaining authorization. How do you think about the parameters that you're looking for? Because at the same time, you know, you mentioned M&A first. I get why. You talk about strategic pivots and opportunities. You guys are in an interesting place. I get why that might be more of an interesting direction, but I'm curious the parameters that you would look at buyback, just given, you know, kind of a wider pullback in a higher rate environment here.
Yeah. I think if you look at where we bought back-
Did it go?
Where we bought back, we were in the mid-40s.
Yeah.
Our stock, you know, had dropped pretty significantly. Our earnings didn't, our fundamentals didn't. We were generating a lot of cash, but the market reacted to some external factors. And we saw an opportunity on, you know, just like M&A, where we're pretty sure we can generate a pretty solid return for our investors. I will say this, though, you can't buy back stock to grow the company, right? It just, it's not really an investment. It generates a decent return for your shareholders when your share price recovers, as ours has. But to really grow the company and create value for the long term, you got to be, it's, you have to have more businesses that are generating more cash.
And so, I think if the opportunity provides itself, and we see a really good value and a really good return on stock, and we look at our acquisition pipeline, 'cause at the same time we were buying back stock, we had some opportunities, but we were, like Bill said, you know, 18 months ago, we sort of said: We're not gonna go into a couple of these markets for a while. We got to fix some internal stuff. It was a really good opportunity for us at that time to buy back shares. We still have a year and a half, little over a year and a half left on our authorization. And, you know, we talk about it every quarter with the board.
We'll see, you know, as we do it, we'll let you know, but M&A is the number one capital allocation, I would say.
... Absolutely. Just in terms of one more twist on this. I got this question earlier, but I figure it's worth bringing up now. You know, we've seen a litany of new products, right? Like, for instance, we've got some tracker companies out there offering, "Hey, now I've got a quality product, I've got a value product." They're trying to hit more ends of the market to try to expand their scope. I've seen this a little bit from players. I'm curious, does that resonate with you guys? I mean, obviously, you talk about fixed tilt and tracker.
You give people options, but even within that, I mean, is there kind of a, you know, even within the C&I space, for instance, is there a place for kind of different, you know, targeting niches more or what have you? Just curious. Again, I get that utility scale, you have more of this bifurcation of how people want to tackle it, but as you think about your opportunities, does that make any sense?
We haven't seen that as much. I mean, again, as I said earlier, we start with a piece of land, getting a return for you based on your set of parameters, and that it'll be what it will be. I will say the one delineation between maybe two groups is if you're selling to someone that's flipping versus someone that's gonna own or operate. So they may invest differently, upfront if they're gonna own and operate versus if they're gonna flip. That's about the only... But that's not new. That's been around for some time. But we haven't really seen a better, best type of-
Right.
-scenario. We don't necessarily subscribe to that ourselves, 'cause it's really never been about the product.
Right. It's about the solution.
I would almost, I would almost add, you know, if you think about structural engineering, which is a big piece of what we do, you know, the system that you put in an area that's not gonna get any snow, and the winds aren't really high, is inherently less costly, and it's less beefy than something that you're putting in the Northeast that's gonna get, you know, wind load, snow load. So, I'm not sure what the competitors are doing with... If that's what they're addressing, sort of, I have a few SKUs. We're not an SKU business. We really, within a product family, it's always designed, the gauge of steel, the length of spans are all designed for that piece of land, for the panel that's gonna be put on it, and for the wind load, snow load environment that it's gonna be in.
Yeah. I hear you. Look, I just, you know, we got a couple minutes left here. Wanna make sure we're hitting it. I mean, when you think about the C&I market, right, I think I heard you say permitting, definitely what you want to be watching. I mean, what is the growth rate of the C&I space, right? I mean, I know that we talk with large titans about the utility scale space being, you know, kind of a teens growth business, you know, across, not you guys, but just broadly across the space. How do you think about the opportunity, right, over the next two years? You know, you talk about a teens growth rate yourself.
Yeah.
What is that market growing? Are you gaining market share?
I think we're a proxy for the C&I market because of our size. So I would suggest that if we were growing 18%+ for five to six years, Terrasmart was growing at the same similar rate, and we're number one and number two, respectively. I think the C&I space. I'm not sure it gets the same kind of visibility or credit that the utility space does relative to inherent market and growth rates. But guys, we've been living in it forever, and it is... Unless we're doing something incredibly awesome relative to the market, the market is a mid-teen to high-teen growth. At least that's been our experience, and it's reflective in our business.
And if I can dare ask it this way, you know, we've never really quite got this promised IRA bump, if you want to call it that. Do you... For every reason that you delineated a moment ago about, well, we had a few years of challenges.
Yeah.
Is there going to be any such bump? I mean, I don't, I don't hear it from you. I hear that you're getting better in a healthy place, but I, I don't hear that there's any kind of step function from here, in growth either.
I think when the IRA came out, you saw more, you saw more interest in people coming to the industry. You know, we're two years into it and still don't have guidance from Treasury on the incremental benefits, but the reality with the IRA has been for the first two years, is you get to keep the investment tax credits you had before.
Yeah.
If you don't use prevailing wages, then you lose it. That's the IRA, what it means for the first 24 months and, and up until whenever we get the incremental benefits. So I think what we hear from customers is there was, you know, people moving forward because they assumed that this was gonna happen. Then people paused because they weren't sure if it was gonna happen. Now, people are moving forward saying, "I don't care if it's gonna happen because I can't stop. I can't put myself out of business, so I'm gonna move forward." And I think a lot of people feel like it'll be retroactive.
So, you know, between that and interest rates going up and all the other things we talked about, you know, listen, if you can plow through this as a developer in EPC, at the end of the day, the industry is down versus where we thought it would be for the last two years, but there's still a heck of a lot that was installed during this timeframe. So there are a lot of people that are still having a good experience. I do think returns are probably not what they once were, but I think they're very manageable, and I think most of these developers look at this as a portfolio, and so they're gonna have some good projects and some not as much, but on average, you know, they can continue to get a good return. And, you know, it's construction.
They know it's not gonna be perfect every time they go out and do something, but, I don't think they'd be moving forward if it were bad.
Right.
You know, just a simple, it's a simple-minded way for me to think about it, but they're, they're finding offsets to some of these headwinds.
Notably, you know, in your list of, you know, issues, if you will, I didn't hear you mention, like, transformers or labor availability. Both of those have come up in different permutations of prior conversations.
Right.
Curious, do you, do you have any thoughts? I mean, again, that's all about being organized and sticking to a schedule, typically.
Yeah. I mean, when we talk about labor, it's our labor for the install. So, you know, we've been able to manage through that relatively well. It's still, you know, it's not as easy as it once was, but I think it's getting easier than it was. But that's just a matter of, you know, we've got an independent group of contractors that are exclusive to us that we've built over the last 10 years. We have all our internal project managers. We've done a lot with autonomous vehicles and other types of equipment to help make that experience that much more productive. If you can do things like that, you get a little less labor dependent than you were a few years ago.
So a lot of things that we've been doing, whether it's in our factories or in the field, have been around, how do you require less labor than you would have otherwise? So there's a little bit of that that's helping us. I think the market's a little bit better than it was. The cost of labor is not continuing to go up. It's still high, but I think it's subsided in terms of, you know, the this rocket ship it was on for a bit. Along with when you have a labor-oriented business like what we have, there's hotels, there's gas, there's transportation, all of that stuff factors into your operating cost, and that has also started to subside a bit. So, you know, it's all leaning in the in the right direction for us, but it's been controllable up to this stage.
Awesome. Excellent. Any final points you think we should... We got, like, a minute or two left here. Anything that you think we didn't hit? Any important updates that, you know, we didn't—we passed over in passing here or what have you, that for the purposes of the conversation? Anything you wanted to communicate?
You know, nothing I don't think we hit. I would say, guys, we run under the radar because we're not a pure play, and we get that. The strength of what we do is built on the foundation around these four pillars, and we're trying to attack some pretty big problems in the world, where food is one of those, that's Agt ech. Energy is the other, and that's half of Gibraltar, and that didn't exist, you know, six, seven years ago. But we like the makeup of who we are because it gives us the bench strength, the balance sheet, the cash generation, to be in a position to make the investments during tough times as well as, you know, good times.
I'm really looking forward to letting people see what happens with our business now that we've invested the way we have the last two years during a really rough time in this industry. Yeah, we're here for the long term, and like I said up front, we're not trying to be the biggest. We're trying to create the most value.
Yeah.
Hopefully that works like we think.
Transparent indeed.
We do appreciate the time today, for sure.
Absolutely. Hey, thank you guys for dropping through. Really appreciate it. You guys take care.
Thank you.
Appreciate it. Thanks, everyone, for the questions.