Good morning, and thank you for standing by. Welcome to the Apogee Fiscal Year 2022 Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your host today, Jeff Huebschen. Please go ahead. .

Thank you, Katherine. Good morning, everyone, and welcome to Apogee Enterprises Fiscal 2022 Fourth Quarter Earnings Call. With me today are Ty Silberhorn, Apogee's Chief Executive Officer; and Nisheet Gupta, Chief Financial Officer. .

I'd like to remind everyone that there are slides to accompany today's remarks. These are available in the Investor Relations section of Apogee's website. .

During this call, we will reference certain non-GAAP financial measures. Definitions of these measures and a reconciliation to the nearest GAAP measures are provided in the earnings release we issued this morning. .

As a reminder, unless otherwise mentioned, Architectural Framing Systems segment results include the Sotawall business unit, consistent with prior quarters. Beginning with the first quarter of fiscal 2023, the Sotawall business unit will be included in the Architectural Services segment. .

I'd like to remind everyone that our call will contain forward-looking statements. These reflect management's expectations based on currently available information. Actual results may differ materially. More information about factors that could affect Apogee's business and financial results can be found in today's press release and in our SEC filings. .

And with that, I'll turn the call over to you, Ty. .

Thank you, Jeff, and thanks, everyone, for joining us this morning. We continued to build momentum in the fourth quarter, delivering solid results to wrap up our fiscal year. I'm proud of what our team accomplished this year, and I'm very excited to update you on our progress and how that work is shaping our fiscal '23 outlook. .

This morning, I will touch on how we are advancing our new strategy, review some highlights from the quarter and the full year and comment on our solid outlook for fiscal '23. Then Nisheet will provide more details on the quarter and our full year outlook. After that, we'll take your questions. .

Entering fiscal '22, we expected this would be a challenging year. We were embarking on a new strategic direction while managing through the pandemic and dealing with a downturn in nonresidential construction. As the year progressed, cost inflation and supply chain issues were added to our list of challenges. But our team rose to take those head on.

I want to thank the entire Apogee team for their tremendous efforts. We navigated through a difficult, but in the end, a very meaningful and productive year. Through our team's work, we have set the company on a path for significant long-term improvements while also delivering near-term results that were above last year. .

In the fourth quarter, we continued to execute our new strategy. As a reminder, our strategy has 3 pillars, which are outlined on Page 4 of our deck. First, we are working to become the economic leader in our target markets.

This means growing differentiated product and service offerings while also building competitive cost structures and more efficient operations. Our goal is to become a top margin generator in our target markets. .

Second, we will be an active portfolio manager. We plan to grow our best-performing businesses, address the underperformers and invest to add more differentiated things. Our overall goal is to improve our return on invested capital. .

Third, we will strengthen our core capabilities. We're building an operating model, processes and systems that better support our businesses, enable greater efficiency and lower costs and provides more scalability as we look to grow and acquire in the future. These shifts will allow us to create peak value for all stakeholders. .

During the year, we drove progress across all 3 of these pillars. Some of the highlights are listed on Page 6 of our presentation, and I will comment on a few.

We completed the realignment of Framing Systems, creating a more integrated business that better leverages our scale and capabilities with more clarity in how we go to market and serve customers. .

In Architectural Glass, we completed the sale of our Statesboro, Georgia facility, we exited the Velocity business and we transitioned all remaining production to our flagship plant in Minnesota. These actions position us to pursue our strategy of focusing on premium offerings where we can differentiate and deliver higher value for customers. .

During the year, we also took steps to strengthen our core capabilities. We drove progress on several projects that will improve back-office operations. We also added key talent across the organization. This included establishing our new transformation management office to drive stronger execution of key initiatives.

We brought in a new segment President for Glass with strong operation skill set and relevant business experience. And we added new leadership for our Lean continuous improvement Program. .

Our revitalized Lean efforts are already having a positive impact. The initial focus was our Glass segment, where we are driving productivity improvements that are now beginning to show in the P&L. And we are expanding Lean to other parts of the organization with an emphasis on the Framing segment this year. .

As we move into fiscal '23, we will continue to execute our strategy through the priorities listed on Slide 7 of the presentation. .

From a broader economic perspective, the external challenges we faced in fiscal '22 are likely to persist through much of our fiscal '23. We expect continued inflation and tight markets for some raw materials, freight and other categories. With that in mind, pricing and cost management will remain key focus areas.

Additionally, our business units and procurement teams are working to ensure the supply of key raw materials. This will allow us to maintain or offer better than market service levels for our customers. .

Despite these headwinds, we do expect to drive meaningful margin expansion primarily in the Framing and Glass segments. We will do this by securing the benefits of the restructuring and cost reduction actions we completed this year, along with continued productivity improvements through our Lean efforts. .

Turning to active portfolio management. During our Investor Day, we highlighted that acquisitions would be a key part of our growth strategy. To support this, we plan to strengthen our M&A capability adding key talent and improving our processes for identifying, evaluating and integrating acquisitions.

We've started the work to rebuild our M&A pipeline and we'll continue to evaluate potential acquisitions as we move forward. .

For us, portfolio management is more than just buying and selling businesses. As part of managing the existing portfolio, we conducted a thorough review of the Sotawall business as we staged it to move from Framing to the Services segment. In recent years, Sotawall has underperformed its potential and it generated a loss in fiscal '22. .

As we previously announced, Sotawall will move into Architectural Services during the first quarter of fiscal '23. We plan to fully integrate Sotawall with our Harmon business within Architectural Services. They will have a single leadership team operating with a proven business model.

We expect this transition will drive significant operational improvements in the coming years and will add scale and capabilities to position Architectural Services for long-term growth while maintaining its position as an economic leader. .

We are also working to improve the sales mix in our existing businesses, increasing the portion of revenue that comes from differentiated higher-margin offerings. We've had great success with this in Large-Scale Optical where we have consistently offered and shifted sales towards higher value products.

We aim to make similar progress in Architectural Glass with our shift towards the premium segment of the market. .

And in Framing Systems, our new alignment enables more focus on the parts of the market where we have the strongest competitive advantages. We expect to accelerate this shift to our selling and bidding activities in both segments, which will position us for additional margin expansion in fiscal '24. .

Our third priority is continuing to strengthen our core capabilities. We will expand our Lean program and begin to build out other elements of our Apogee management system. And we'll continue to advance our enterprise transformation projects to optimize and simplify back-office processes.

In support of this, we plan to make further investments to add capabilities and improve productivity. .

improving margins, increasing return on invested capital and positioning the company for above-market growth. This should translate into significant earnings growth in fiscal '23 and beyond. .

Let me close by once again thanking the Apogee team for their contributions this year. I am confident we have the right strategy, that we are executing it well and are positioned for continued success as we move forward. .

With that, let me turn it over to Nisheet to provide more details on our results and the outlook.

Nisheet?.

Thank you, Ty, and good morning, everyone. The fourth quarter was a strong close to our fiscal year. We achieved top and bottom line growth. Our pricing and cost actions offset the impact of inflation. And we generated solid cash flow, allowing us to return cash to shareholders. .

Let me provide some more details starting with fourth quarter results on Page 8 of our presentation. Fourth quarter revenue grew 6%. This was led by over 20% growth in both Architectural Services and LSO segments, along with 9% growth in Framing Systems. .

The quarter included several items that we excluded from our adjusted results. First, we took an impairment charge related to Sotawall. As I mentioned and previously announced, we plan to fully integrate Sotawall into Architectural Services segment starting in Q1 of fiscal '23.

During the fourth quarter, we continued to evaluate this optimal strategic approach to integrate Sotawall into Architectural Services and finalize our integration plan. .

As part of this, we evaluated the Sotawall assets and determined that certain assets, mainly intangible assets, were impaired. We expect to see improved performance in the future for the combined business under the leadership of Services segment. .

During the quarter, we continued to execute the restructuring actions we announced last summer. In the fourth quarter, we had $6.3 million of restructuring costs. As part of the restructuring, we sold our glass facility in Statesboro, Georgia. This has led to a $19.5 million gain in the quarter. .

We are pleased with how our teams have executed the restructuring. Everything has proceeded on schedule and is largely complete, and we are beginning to achieve the targeted cost savings. .

Overall, during the year, we incurred $30.5 million of restructuring costs. Of this, $9 million was cash expense. When you include the proceeds from Statesboro sale, the overall restructuring program was significantly cash positive for the fiscal year.

Excluding the impairment, restructuring and gain on sale of assets, adjusted operating income was $27.7 million, and adjusted operating margin improved to 8.4%. This was 130 basis points better than last year's fourth quarter. The primary driver was the impact of our pricing actions, especially in Framing Systems.

Improved pricing fully offset the impact of inflation in the quarter. Margins also benefit from our restructuring and cost-saving efforts. .

Adjusted earnings were $0.91 per diluted share. This was 44% higher than last year's fourth quarter. .

I would like to highlight that adjusted margins and earnings improved sequentially each quarter during the fiscal year. This demonstrates the positive momentum we have established in the business. .

Full year results are shown on Slide 9. Full year revenue grew 7% led by Architectural Services, which achieved record full year revenue of $349 million. Large-Scale Optical fully recovered from last year's COVID-related shutdowns and saw renewed growth in its core markets and exceeded $100 million of annual sales for the first time. .

Full year operating income and margins were down from last year. This mainly reflects the impact of inflation. .

Adjusted earnings grew to $2.48 per share. This was driven by top line growth and a lower share count. .

Finally, our key performance metric of ROIC improved by 40 basis points. We have included a new reconciliation table in our earnings presentation that shows our ROIC calculation. Going forward, we'll continue to share ROIC performance on an annual basis. .

Let's turn to segment results on Slide 10. Starting with Architectural Framing Systems, fourth quarter revenue grew 9%. This was primarily driven by pricing actions taken to offset inflation. Volumes were lower than last year.

Adjusted operating margin was 3.8%, that is 110 basis points better than last year but well below the segment's long-term potential. Going forward, we expect to see improved margin performance in Framing as we achieve the benefits from our restructuring and cost reduction efforts. .

Moving to Architectural Glass. Revenue was down 12%. As expected, this was mainly driven by lower volumes. We have had fewer new project awards over the past year while nonresidential construction has been in a downturn. We were also strategically shifting away from some low-margin sales. .

Adjusted operating margin was 6.4%. This was 200 basis points better than last year and 340 basis points higher than third quarter. We are beginning to achieve cost savings from our restructuring, along with productivity gains from our Lean program. .

Moving to Architectural Services. Revenue grew 21% to a record $99 million. Operating income of $11.8 million was also a record high. This was driven by strong project execution and leverage from increased volume. Services backlog declined to $518 million. This was driven by strong revenue conversion in the quarter, along with lower new order volumes.

As a reminder, Services orders can be uneven from quarter to quarter. We are encouraged by increasing bidding activity in the recent months, which should lead to a rebound in orders over the next few quarters. .

Turning to Large-Scale Optical. Revenue of $27 million grew 23% compared to last year's fourth quarter. This was mainly driven by increased sales of high-value products, and margins were strong at 23.7%. .

Finally, fourth quarter corporate costs were lower than last year and below the run rate we have seen in the past several quarters. This was mainly driven by favorable insurance costs. .

Turning to Page 11. Our cash flow and balance sheet remained very strong. Full year cash flow from operations was $100 million. This was followed by last year's record cash flow of $142 million. We also brought in $31 million of cash from sale of assets. .

Our capital spending remained lower than normal this year as we slowed some investments while we completed our strategic review. .

Our net leverage remained less than 1x adjusted EBITDA. This is well below our target of 1.5x EBITDA. We have no near-term debt maturities, and our revolving facility is undrawn. .

With a strong cash flow, low leverage and limited capital spending, we were building cash on our balance sheet. In the fourth quarter, we decided to put some of this cash to work buying back stock. During the quarter, we purchased 1.5 million shares for $71 million. For the full year, we purchased $100 million of stock. .

Going forward, we'll continue to deploy cash and value for shareholders. The capital allocation strategy we shared with the Investor Day -- on our Investor Day is on Page 12 of today's presentation. .

Our first priority is investing to drive profitable growth. This will include both organic investments and M&A. Our second priority is returning capital to shareholders. We recently increased our dividend, and we'll continue to evaluate opportunistic share buybacks. We will also work to maintain a strong balance sheet. .

Let me wrap up by discussing our outlook, which is on Page 13. We are providing initial guidance for fiscal '23 of adjusted EPS in the range of $2.90 to $3.30 per share. At the midpoint, this would be 25% year-over-year growth. .

We expect total company revenue will grow in fiscal '23. This will be mainly driven by pricing in Framing Systems. We expect revenue in other 3 segments to be relatively flat given that Services backlog declined during the bottom of the pandemic and Glass is focused on value, not volume. .

We also expect to drive significant margin expansion during the year. This will be mainly in Framing Systems and Glass as we achieve the benefits from our restructuring and continue to drive operational improvements. .

While we are not providing quarterly guidance, we expect the flow of earnings next year will be similar to what we saw in fiscal '22. As we mentioned, we plan to move Sotawall into Architectural Services in the first quarter of fiscal '23.

To help with year-over-year comparisons, we included tables with pro forma segment results in the appendix of our earnings presentation. Also on Page 14 of today's presentation, we are updating the long-term margin guidance we presented during our Investor Day to reflect the move of Sotawall into Architectural Services. .

To close, I would like to thank the Apogee team for all their work over the past year. We have delivered strong results despite many challenges during the year. We delivered EPS growth. We have strengthened our core by investing in standard processes and deployed new systems. We have begun to execute on our new strategy.

And we are well positioned for even stronger results in our next fiscal year. .

With that, I'll turn it back over to Ty for some concluding remarks. .

Thanks, Nisheet. Apogee's significant strategic shift is well underway. We've taken steps to align and simplify our business. We are building a more competitive cost structure. We are establishing a new operating model grounded in our Lean program. And we are advancing our enterprise transformation initiatives.

Our progress is beginning to show in our financial results with adjusted margins and earnings improving sequentially each quarter during the year. .

In fiscal '23, we will continue to execute our new strategy. We expect to deliver significant earnings growth this year even without meaningful volume growth as put-in-place spend is projected to only be marginally positive.

We do see a long run rate for further improvements in the years ahead as our core markets recover, the economy stabilizes and we shift our mix to higher-value offerings. .

With that, we're ready to take your questions. .

[Operator Instructions] Our first question comes from Chris Moore with CJS Securities. .

So pricing fully offset inflation in Q4.

Is that assumption built into the fiscal '23 guide?.

First of all, we're very pleased with the work that our teams have done over the last quarter. This is the first quarter where we have been able to offset all of the inflation impact across our businesses. So that trend is that new muscle that we have built on offsetting inflation is going to continue throughout the fiscal '23. .

We do have a lot of volatility in the market right now, as you can see on the commodity prices, aluminum, energy prices most recently. And therefore, we are cautiously optimistic that our teams will be -- will continue to offset inflation throughout fiscal '23, and that has been built into our guidance. .

Got it. On the Investor Day, you guys talked about revenue growth targeted at 1.2x nonresidential construction growth. The last -- I think it's the FMI index that you guys focus on really, the last number I saw there, I believe, was 3% for calendar '22.

Given the lag of some of your business lines, if that 3% is accurate for '22, is that a better baseline for Apogee in calendar '23?.

Yes. Thanks, Chris. This is Ty. As you look at FMI, the reason we chose that and used it at Investor Day is we felt it was closer to kind of matching up with our current year. It's not perfect, but it's directionally correct, where Dodge and ABI kind of give more of an 18- to 24-month view of how that would hit our revenue.

So that number has recently been revised down to 1%, but that was in current dollars, so there's likely to be some price inflation even in that number. .

But that is a good guide. I made the comments as my wrap-up here that we do see marginally positive growth. That 1% to 3% is what we were looking at and factoring that into our assumptions. .

Got it. That's very helpful. And last one for me is on the revenue growth. So it looks like you'll get some growth out of Framing. Glass Services, LSO, you're talking about roughly flat.

Which one of those has, out of those 3, the highest likelihood of surprising in either direction?.

What I'd say Framing has the shorter cycle time. A larger percent of their revenues has shorter cycle, so we tend to see that respond faster. So if there is a pickup in demand, whether that's driven by projects on the ground or even people trying to get ahead from a supply standpoint, we're likely to see that in Framing.

That's where we've seen pricing take hold. We're also doing some work, of course, to offset costs because we have to stay competitive in the marketplace from a customer perspective. But when we look at kind of where we expect the drivers to come from, it's likely going to be led by Framing, pricing being a large part of that. .

Our next question comes from Eric Stine with Craig-Hallum. .

So maybe just to stick with Framing, just to kind of dig in there a little bit and take your temperature. So on one hand, a lot of your commentary, certainly in the release, kind of feels like your thought is that you've turned the corner there, but yet it also seems like your expectation is that there's much more improvement to go. .

So just maybe just expand on that a little bit. Where do you think that business is? I know you've got the changes going on with Sotawall and that, that will be exiting. But maybe just some thoughts expanded on Framing. .

Sure. I appreciate the question, Eric. As we look at Framing, the one area you have to pay attention to, right, is that Sotawall shift. So we've got in our appendix that pro forma view. We look at Framing performance, Sotawall was a drag in that fourth quarter. Sota did post a loss for the year and the bulk of that loss did come in that fourth quarter. .

Setting that aside, Framing actually sequentially was relatively flat from a margin perspective. We do expect them to do better. What we saw as we closed out the quarter in terms of both pricing and cost, we saw improvements there.

So we do expect that momentum to carry forward here in fiscal '23, staying ahead on the price and inflationary side and then also taking advantage of the cost structure efforts that they did last year. .

And frankly, there's some upside there because we're really just reinvigorating the Lean efforts in Framing. We started out with Glass. We shifted that to Framing. So there's even some upside there from a margin perspective for Framing as we move through the year. .

Okay. No, that's helpful. Maybe just turning to Services then, I know this is a business that's late cycle. The outlook or the question that you've had and been upfront about is, will you be able to fill in the backlog there so that there is not a dip as you work through projects? So maybe just some thoughts on that where you see Services. .

I know you've guided to for fiscal '23 flat year-over-year, but just more kind of high-level view as you think multiyear view?.

Yes. And that's -- you hit it right on there. That is our longer-cycle business. That downturn in the last 18 months, the value of that downturn, if you will, in terms of jobs awarded, that is now flowing through our Services business.

So for them to end up relatively flat would once again point to that they've outperformed the market with respect to that. So as we look at the year, I think that's a good guide if there may be a little bit of upside. .

But their work now is focused on building that backlog, which is still strong. It's over $500 million. That continues to be well above historical levels. So that bodes well as we look at fiscal '24 and beyond as well. .

So the team just as they did last year, they kind of were able to fill in some of the gap that they potentially were looking at for fiscal '23. Now they'll turn the attention not just to executing on the job flow, but working on starting to build up fiscal '24. .

Okay. No, that's great. And yes, I mean, clearly, the trends there have been good in light of everything going on. .

Maybe last one for me. Just -- and I know there are so many moving parts here, but I would just love your thoughts on some of the headwinds that are in the market right now. And I know you factor these into your guidance to a large degree or at least to some degree.

But whether it's labor, supply chain, potentially higher interest rates, how that impacts the projects that you are going after. Would just love your kind of high-level thoughts on all of those. .

Sure. I would say material -- raw material inflation is still the biggest concern and that we're monitoring and watching that. And we're working -- from a customer perspective, we're trying to balance what we need to do on price with also taking costs out where we can to offset some of that and stay competitive.

So a lot of the challenges we saw last year, I think, carried through most of this calendar year, which is the bulk of our fiscal '23. So pricing on raw materials and just general supply of raw materials. .

We continue to lean heavily on a very strong procurement organization that not only within our business units, but we built up some additional muscle and support at the corporate level.

So their focus will be not only to help manage costs, but probably even most importantly, ensuring that we continue to get the right level of supply to service those customers. .

From a broader market perspective, we are keeping an eye on that just in terms of how does that potentially impact projects that might be greenlighted or not as they reassess costs associated with doing those projects. We haven't seen a negative trend in that area. We continue to see, just as the market reports have shown, an expansionary number.

So growth, we see a pickup in some bidding activity. It's bumpy just given the backdrop of the economy. But right now, that's -- another piece we're looking at long term is, at what point do interest rates or higher material costs at a minimum start to cause some folks to rethink size of projects or timing of projects. .

Our next question comes from Julio Romero with Sidoti. .

On the Glass segment, you saw a really nice sequential jump in the margin there on flattish sequential sales.

Can you just talk about what's driving the margin there? And does that strength continue into the first quarter?.

Yes. I mean I would say that the work we touched on before around productivity improvements as well as really capturing the benefits of the restructuring, that started to really show in the fourth quarter. We do expect that to continue. So Glass, even if it's flat on volume, we expect them to continue to see margin improvement. .

So year-over-year, from a total year perspective on a margin as a percent of revenue, that's the business that we'll probably see the biggest step-up of improvement on that. And it has to do with that work that they are doing from a productivity standpoint as well, not just capturing the restructuring side. .

And Julio, just to add there, if we think about the 2 sites that we have shut down as part of that restructuring that Ty mentioned, we have shut down the Velocity business that was not making money for us. And also, we have the Statesboro site that we have shut down.

So we are really improving the productivity with Statesboro, and those losses are not there anymore in the fourth quarter. .

Okay. Great. That's really helpful there. Could you maybe just speak a little bit on volumes in the Framing segment? I know you had volumes down year-over-year and I think the orders in the quarter were down sequentially, but off of a high base. So can you just talk about your expectations for volumes in the Framing segment. .

Well, I think when we look at revenue for Framing, it was led by price. So there was a negative volume.

As we look at fiscal '23, I think we'll still see -- we're going to see revenue growth and we'll still see that primarily led by price, but some of the indicators are that we will see positive volumes starting to come through on that business as well. .

We're definitely seeing some increase in the bidding activity in the Framing segment also, and we are monitoring it very carefully. As you know, the story on Framing gain for this year is not much about the volume, but it's about improving our profitability and we are well on track to achieve that. .

Yes. Understood. And maybe last one for me is just on the corporate cost line, you mentioned there were some favorable insurance costs that drove that a little bit lower than normal.

Can you just remind us what the good run rate for corporate as we head into fiscal '23?.

Yes. So corporate, we've got a lot of ins and outs that go into it. If you think about quarter 3, we had a $7 million in corporate, we had $1.9 million last year and we have $0.5 million in this year. So I would expect about a $3 million to $5 million of corporate costs that will go in a normal quarter. It depends on many things that are happening.

In corporate, we true up/true down insurance costs and medical costs. Last year, the medical costs were a significant headwind for us. So we expect that those true-ups and true-downs will normalize during the course of this year, and a $5 million type of a charge would be a normal run rate. .

Our next question comes from Jon Braatz with Kansas City Capital. .

Ty, I had a question. In the third quarter call, you mentioned that unrecovered raw material costs amounted to about $28 million through the first 9 months.

Where do you stand now, given that aluminum costs have gone up significantly? Are we worse today than where we were at the end of the third quarter?.

I would say we're slightly better, Jon. And as we commented in the fourth quarter, we saw price versus inflation offset probably slightly positive. And so if you look at the full year, that number has not gotten worse, it has probably gotten a little bit better. .

As we go forward, we're working to balance those things out to stay competitive in the market. And we'll continue to drive -- make sure we can stay whole from a pricing standpoint, but also continue to work on costs so that we're adding value for our customers at the same time. .

So as we look ahead towards next year on balance -- or fiscal 2023, you expect that to continue to come down a little bit and you begin to recover more of those costs?.

Yes. So just to clarify, as we think about the quarter 4, this is the first quarter in which our teams have been able to offset all of the inflation with price increase and productivity. So that's the first good data point and news we have for quarter 4. .

As we move into the next year, our teams have built that muscle that all of the material inflation that will come through will be offset with price increases, unless there is a significant volatility that kind of impact our short-term -- short lead time businesses. .

So to answer your question, we are well positioned not to have a very big headwind on inflation in fiscal '23 unless there is a lot of volatility in the market. .

Yes. Absolutely. Understood. Okay.

And then, secondly, as you transition the Sotawall to Services, do you envision any restructuring costs or a assimilation cost or integration cost this year?.

At this point, the team has built into their plan whatever costs they'll have with doing that integration. Sotawall was a business unit that had been operated much like most of the acquisitions historically, so a stand-alone business unit. So getting them on same systems, same platforms, there is some expense related to that.

That's built into our guidance and Services has built that into their budget and plan for the year. .

We're not expecting any large restructuring charge happening for Sotawall integration in this fiscal '23. .

We have a question from Zane Karimi with D.A. Davidson. .

And I appreciate the color so far. So first off here, when we're looking at the outlook for fiscal '23, the backlog has improved some in Framing.

So I'm just trying to understand between the self-help initiatives and segment growth expectations, which of the two will really drive the material increase in earnings over this year that you're implying within guidance?.

So if you think about the earnings guidance, we landed at $2.48 for this year, and we're looking at a midpoint of $3.10, right? So a couple of things that are happening there. First, the share repurchase that we did in all of fiscal '22, a majority of that in the fourth quarter, will have a big impact into the EPS for next year.

That's the first big driver. .

The second is all of the restructuring actions we are taking, all of those actions will have a full year impact coming into next year. That will be the second big driver on our EPS gain year-over-year. .

And the third is, in fiscal '22, we had a lot of net inflation negative impact. In the first 3 quarters, we had negative impact. We were only able to offset that in the fourth quarter. That is not going to be the story for next year. And that's the third big driver that will not have a negative impact year-over-year. .

So those are the 3 big ticket items that we think and we believe that our guidance of $3.10 midpoint is well within the range of our team is achieving. .

Great. I appreciate that.

And then maybe a little bit more, but what's the thought process today on acquisitions after you conclude the restructuring actions over the next quarter or so?.

Yes, Zane, I'll talk to that point. As we said in Investor Day, acquisitions will be a lever that we intend to pull as part of our growth strategy. So we're going to take a disciplined approach in how we do that.

As I commented in my remarks, that's an area of focus as we strengthen our capabilities there and strengthen the process associated with that. So we started rebuilding that M&A pipeline, if you will, over the past few months and that work will continue as we go forward. And it will be an area that we'll look to action at some point in the future. .

Thank you. And there are no other questions in the queue. I'd like to turn the call back to Ty Silberhorn for any closing comments. .

All right. Well, thank you. Let me end the call today by once again thanking and congratulating our employees. We've accomplished a great deal in what was a turbulent year, and we positioned the company for greater success in fiscal '23 as well as the years ahead.

For those on the call, thanks for joining us today as well, and we look forward to updating you on our first quarter results in a couple of months. Have a great day. .

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day..