Good morning. My name is Mark and I will be your conference operator today. At this time, I would like to welcome everyone to Atkore's Third Quarter Fiscal Year 2024 Earnings Conference Call. All lines have been placed in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session.

[Operator Instructions] As a reminder, this conference is being recorded. Thank you. I would now like to turn the conference over to your host, Matt Kline, Vice President of Treasury and Investor Relations. Thank you. You may begin, sir..

Thank you and good morning, everyone. I'm joined today by Bill Waltz, President and CEO; as well as David Johnson, Chief Financial Officer. We will take your questions after comments by Bill and David.

I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially.

Please refer to our SEC filings and today's press release which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

In addition, any reference in our discussion today to EBITDA means adjusted EBITDA and any reference to EPS or adjusted EPS mean adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures.

Reconciliations of non-GAAP measures and a presentation of the most comparable GAAP measures are available in the appendix to today's presentation. With that, I'll turn it over to Bill..

Thanks, Matt and good morning, everyone. Starting on Slide 3, in the third quarter, organic volume was essentially flat year-over-year. We saw strength in our construction services business due to large mega projects and from solar due to increased production in our Hobart, Indiana facility.

These gains were offset by broad pricing softness across most of the Electrical business. We did not see a noticeable summer construction uptick in demand as is generally the case.

Pricing was softer than expected due to the slower end markets, particularly for our PVC conduit business and higher concentration of large projects where pricing tends to be more competitive. Overall, selling prices were also down 4% sequentially from the second quarter. Volume grew 8% sequentially and 4% year-to-date.

The third quarter proved to be more challenging than we initially projected, while our net sales were within the range of the outlook we presented back in May. Adjusted EBITDA and adjusted diluted EPS were both off the midpoint by 4%. Our lower-than-projected EBITDA was due to overall softer-than-expected market conditions.

We believe the current market is flat to slightly lower than last year. However, this trend varies by major business. Another challenge we are facing is an increasing amount of imported steel conduit coming primarily from Mexico. There are currently provisions in place between both countries that are meant to limit the amount of steel conduit imports.

However, the statistics reveal the amount of conduit shipped from Mexico into the United States far exceeds these negotiated limits. This reality has been acknowledged by others within the industry, prompting a call to action.

These increased amounts of foreign steel conduit natively impact our volume year-over-year, while the overall market inclusive of imports has grown year-over-year. We also continue to experience softness in the telecom and the utility markets.

Despite the challenges we are facing in the market, we are progressing well in our own operations and are confident in our long-term opportunities. We are pleased to share that our production and shipments of solar torque tubes at our Hobart, Indiana facility improved meaningfully from the second quarter to the third quarter.

We continue executing our capital deployment strategy during the quarter by repurchasing $125 million in shares, bringing our year-to-date total for share repurchased to more than $280 million.

On that note, I want to remind everyone that as we near the end of our previously approved multiyear $1.3 billion share repurchase authorization, our Board of Directors authorized a new $500 million buyback program in May which will be available upon the completion of our existing plan.

This new authorization is consistent with our commitment to returning capital to shareholders and reflects the Board's continued confidence in the compelling value of Atkore shares. In light of the challenging market environment, we are adjusting the midpoint of our fourth quarter EBITDA outlook.

However, we remain confident in the long-term opportunities for our diversified product portfolio.

Overall, our broad product portfolio provides essential elements for nearly all types of construction, especially those that support secular trends, including solar power, data centers, artificial intelligence, infrastructure digitization, grid hardening and support for the energy transition.

The breadth of our product portfolio enables Atkore to be resilient to changing end market demand while remaining a supplier of choice across our channel partners. With that, I'll turn the call over to David to talk through the results from this quarter..

Thank you, Bill and good morning, everyone. Moving to our consolidated results on Slide 4. In the third quarter, net sales were $822 million and our adjusted EBITDA was $206 million. We delivered a strong adjusted EBITDA margin of over 25%. Our tax rate in the quarter was just under 22%.

As a reminder regarding the year-over-year comparison of our tax rate and adjusted diluted EPS, the change in our accounting treatment for the solar credits associated with the IRA in the third quarter of fiscal 2023 drove a tax benefit that lowered our effective tax rate to less than 9%, as we recognized 3 quarters of the expected benefits in Q3 of 2023.

During the third quarter last year, we changed the accounting treatment from what we had recorded in the first 2 quarters. This change reflected the benefit of the credit as a reduction of tax provision rather than a reduction in cost of sales.

This lower tax rate also helped contribute $0.50 to our higher-than-expected adjusted EPS of $5.72 last year. Turning to Slide 5 in our consolidated bridges; our volume in the quarter was essentially flat compared to the prior year, while net sales were at the midpoint of our guide. Our third quarter results were below expectations.

While we saw sequential growth in net sales during the quarter, we did not see a lift from the seasonal construction demand. Typically, our third quarter benefits from the seasonality and we see sequential profit growth. The net impact from solar credits was a reduction in EPS of $0.37 year-over-year.

As mentioned in my comments on the previous slide, our change in accounting a year ago added $0.50 to EPS. Moving to Slide 6; our year-to-date volume increased 4% compared to the prior year, with contributions across the portfolio. We continue to see growth in our overall PVC products category.

Our metal framing products also contributed to growth as they benefit from data center expansion. Our year-to-date performance has been impacted by continued softness in the telecom market. As Bill outlined earlier, our steel conduit business has met resistance from a significant increase in imported conduit.

Our year-to-date volume has been negatively impacted by this surge in imports. That said, we remain confident in the long-term potential of our diversified portfolio. We expect that our portfolio of value-added products, along with our resilient business model, will continue to provide us with sustainable growth opportunities as our markets stabilize.

Turning to Slide 7; both segments had strong EBITDA margin performance in the third quarter. Our Electrical segment achieved 30% margins. Price versus cost continues to be unfavorable on a year-over-year basis.

Last quarter, we acknowledged that in addition to PVC price compression, we also experienced year-over-year declines from our HCP business which continued this quarter. Our S&I segment EBITDA margins continued the trend of sequential improvement since the first quarter, achieving just under 14% in the third quarter.

This improvement is due in part to better operational performance at our Hobart, Indiana facility. Turning to Slide 8; we continue to execute our capital deployment model, supported by robust cash flow generation. The strength of our balance sheet allows us to be flexible in the way we deploy capital to deliver value for our shareholders.

With that, I'll turn it back to Bill to talk through some updates relating to our FY 2024 outlook as well as our views on FY 2025..

Thank you, David. Turning to Slide 9. While we achieved 3 consecutive quarters of adjusted EBITDA over $200 million in fiscal 2024, we currently believe that Q4 will be lower than this trend due to ongoing softness in the overall market which has led to a more challenging pricing environment.

As we look forward to the fourth quarter of fiscal 2024, we are amending the midpoint of our adjusted EBITDA outlook to $145 million.

Our fourth quarter outlook reflects a continuation of or an acceleration of several factors that have impacted us, most notably, the pricing dynamics in PVC and import issues in steel conduit, in addition to the overall soft markets diminishing volume growth.

As I've discussed at the start of the call, we expect the softness in overall market to continue into the fourth quarter which impacts both volume and price. Further, domestic manufacturers of steel conduit are likely to face continued pricing pressures come with these elevated and increasing steel conduit imports.

Turning to Slide 10; we have updated our key bridging assumptions for the full year which is reflective of the items mentioned earlier which are likely to impact our fourth quarter performance. We are currently in our annual planning process. As we look beyond fiscal year 2024, we now believe that FY '25 will be our new earnings base.

We expect to see EBITDA improvements from some of our growth initiatives related to solar, HDPE, water, construction and our regional service centers.

Some of these initiatives are still significantly below our original expectations and where we expect these businesses to operate in the midterm but we do anticipate them to contribute positively year-over-year.

For the remainder of the business, we expect to see continued productivity improvements and overall modest volume growth in the low single digits with a possibility of higher growth as new switchgear capacity comes on board and further supported by the prospect of a lower interest rate environment.

The larger question that remains is what the pricing environment will be as we progress through FY '25. We expect the environment to remain challenged through the remainder of this year and into FY '25.

Although there are many uncertainties at this time, we will have a more important perspective in November, our initial EBITDA estimate for FY '25 would be around $650 million given the market environment. However, this estimate could go higher construction activity in areas such as residential and utility starts to improve.

We anticipate having strong free cash flow and will continue to be investor-centric in our capital deployment strategy. We remain focused on preserving our history of transparency and we'll continue to provide updates on key topics that impact our business.

Before we go into Q&A, I also want to address the announcement we made relative to David's departure. Atkore has been extremely fortunate to have David's leadership over the past 6 years.

Under his leadership, Atkore has created a balanced capital deployment model, enabling acquisitions, internal investments, stock repurchases and quarterly dividends to drive value creation for our shareholders. David will be missed both as a colleague and an Atkore teammate and we truly wish him the best in his next chapter. Thank you, David.

Looking ahead, Atkore has a strong model for organizational leadership succession planning which enables a smooth transition. We're fortunate to have 2 incredibly strong leaders in John Deitzer and James Albe, who will assume the role of Chief Financial Officer and Chief Accounting Officer, respectively, as of August 9.

We look forward to all that is to come with this new phase in Atkore leadership John and James are working closely with David to ensure a seamless transition and we are fortunate to have a deep and talented financial team that will help support John and James as they get up and running in their new roles.

With that, we'll turn the call over to the operator to open the line for your questions..

[Operator Instructions] Your first question comes from the line of Andy Kaplowitz with Citi Group..

So obviously, you revised higher the amount of price versus cost normalization to $325 million this year versus the initial $250 million. But could you give us your latest thoughts on what the overall price cost normalization could end up being versus that initial estimate you gave us of $585 million.

And then I think you said, Bill, $650 million is your initial estimate of EBITDA for '25. When we think about the exit rate in Q4 of $1.45, can you give us some color what would be the puts and takes versus that run rate in '25? Anything to quantify would be helpful..

Sorry, Andy. Obviously, two very important questions. I think when you look at the $325 million this year, I will remind everyone that a portion of that does include HDPE which would not have been in our original estimate of the $585 million. So if you assume somewhere around $35-plus million or so of that price cost is in the $325 million.

We would have been just under $300 million this year. So you add that to the $250 million last year, you're at 550 or so against the $585 million. Given where we are right now, what we saw last quarter and what's built into our Q4 forecast, you would expect next year to be over 200 -- 200, 250 type of range.

And then you will see some benefits from our initiatives coming up. Obviously, you'll see some from solar year-over-year, our global mega projects so on and so forth Andy. Very modest kind of volume built into that $650 million number which is what Bill mentioned. So hopefully, that helps out..

It does. And then Bill, maybe you could elaborate a little more on what changed in the environment between last quarter and this quarter. I think last quarter, you did talk about a weaker start to the construction season but it seems like conditions on the ground got a fair amount worse.

Did you see more project delays than you thought? Did your customers start destocking? And then you do have pretty severe decrementals in Q4 versus Q3.

Is that just all price? Is there something else going on?.

Yes, Andy. I'll say yes, all of the above. So in other words, you have to remember kind of either our products or our markets that we serve all markets and we're proud of that. And things like data centers are really strong and moving ahead and so forth, as David just spoke about, as we go into next year in solar and so forth.

But obviously, markets, whether it's commercial construction, I assume from you or other shareholders and so forth, the utility markets are weak right now. Again, that should bounce back hopefully, as we get in the second half and all the other long-term secular trends.

But right now, for most of our markets and essentially, we called out on the one page, the deck where we showed the percent, the 1 or 2 key markets. So that's where like, okay, we serve everything. But if you're PVC, hey, it's utility and residential and there's just not subdevelopment being built at this stage. And obviously, multifamily home is down.

So the specific markets that drive us most are much quieter. I do think there's job delays.

I would have to start speculating on how much when the Fed starts cutting interest rates, that that should pick up even into next year but the markets and whether you look at public companies, whether a distributor or others that have commented in our markets but I can tell you from talking without naming them, these 2 of the top 10 largest distributors that are private are seeing the same thing we're seeing, quite frankly, I think, worse than we're seeing.

So there is a little bit of us using our RSCs and so forth that it's a down market in the -- the end market and the markets we serve right now.

So and that is driving more price competition Andy, than we thought that, again, I can't control, obviously, what our competitors do is they try to fill factories or listen to somebody else saying here's the price you need and reacting to that.

David did call that out, I think, in our prepared earnings as we looked at this quarter, to say, hey, if the markets are weaker and they are. And as -- obviously, it's a crystal ball.

But as we go into next quarter, I'd rather get out in front of it now and pick numbers that, obviously, it's a forecast but we expect to hit or exceed probably like every quarter and then just focus on our fundamentals which I'm absolutely so convinced of our people and the long-term strategies..

So just one more quick one for me. You mentioned increased import pressure in steel conduit. Can you give us a little more perspective on how much of an impact that is happening on the business.

We know Metal conduit is 20% of your business but since you called it out, is it having an even bigger impact on your business than that? And I think you are seeing increased competition within Core PVC but is it really the steel stuff that hits you more this quarter?.

Yes Andy, you did. That's where, again, I assume every company has but trying to be transparent. As we go from our fiscal Q3 to Q4, I don't want to rank but I'll just say it's in the top 2 of challenges in the following way, just give more color here.

There's always almost for every product when customers ask, is there an import? Well, yes, there's a little bit of like cable, I'm making up a number but on low single digits, 1% or something coming from Canada. Steel conduit has been that way and it's grown over 10 years or so from 3% to 5% out quite frankly, somewhere around 20%.

And there still is a preference for made in the U.S.A., the quality of the products, everything else we're doing electro contractors here and better appreciate our brands and support American made.

But it's grown to the point that whether I move first or my domestic competitors have moved to the point that you just can't tolerate a 15% price decline in that product. And these are all rough numbers, it's on the "job". So as we factor that back into our business here to respond. At some point, you can ignore 5% market share.

You can't -- at some point you just can't ignore competition coming in and undercutting the market..

Your next question comes from the line of David Tarantino [ph] with KeyBanc Capital Markets. David..

Maybe just to start out to put a little bit of finer point on the price normalization.

Can you give us some color on kind of the incremental $50 million of headwind in the outlook? Just kind of how you would think the breakdown is by the incremental headwinds? Like how much is kind of the import headwind versus incremental PVC and HDPE pressures?.

Yes. So I'll try to -- and then David can give me more color or whatever or ask more color. But I do think it's probably split. If I had to like cradle it, I'd give a little bit more to metal conduit that Andy just asked about.

I mean -- and that is -- it's a trend that I mentioned to Andy, that it's not like these guys came out of nowhere but it's just the reflection even in last quarter, the guy, hey, we have to start reacting to this and we are and customers see. So that's probably first then it's probably PVC and HDPE.

Again, I want to emphasize a little bit beyond, is there other products dropping 5% like year-over-year, yes but there's also products going up 5%. So, almost a long-term normalization a bunch of our products do move around small sign and wave.

And when I referenced all those David's comment from last quarter, volumes pick up into next year as a lot of people expect I'm assuming a stronger market and we actually could get price. But right now, going into the year or even next fiscal year in this quarter, it's tougher than we expected at the moment..

Okay, great.

And then, maybe could you give us an update on the ramp of the solar torque 2 facility? How has it progressed versus expectations from last quarter? I know it's early but maybe could you frame how you're thinking about this into next year?.

Yes. It's positive -- I'll do this, the challenge first. The only challenge which is not a new thing is we expected to be here pick a time 9 months ago. But from the standpoint of and don't hold exactly what quarter and so forth. But we're ramping up at double-digit percent. Our customers are still out there.

I think some of the customers, I don't want to speak for them, have a little bit of challenges on getting utility hook-up with solar and stuff like that. But there's enough opportunity out there. We're watching those things but there's enough opportunity for us that we're growing. I'm really proud of the team.

I mean, albeit that we should have been here before. But at this stage, we're ramping up in every facet as expected. And then David, to your kind of follow-on question is, -- our David CFO referenced as we look into next year, yes, we may have pricing headwinds. But we do have a lot of these growth initiatives.

I should add, it's not in the prepared remarks but at least $50 million if not more, of incremental EBITDA going into next year. So we are on track out of the team. And obviously, there's still pressure to continue to pick up on that number. But things are going well, if I look at quarter-over-quarter for the last couple of quarters..

Your next question comes from the line of Alex Rygiel with B. Riley. Alex..

You referenced a softness in the telecom and utility market.

I suspect that was year-over-year but my question is, how are these markets performing sequentially?.

Really flat. Lastly, Alex. I mean, minor little bits of increasing in quotes which I think maybe is a precursor for a better volume kind of going into maybe next quarter, next year. But as we sit here today, I would say not a meaningful sequential increase..

And then I don't know, Alex. David, just answered for us, that's what's most important but just to triangulate it without obviously, any other companies, there are distributors and so forth. They mentioned the weakness in this market. If you looked at Dodge, they're predicting utility be down 6% this year. So yes.

I don't think anyone is going to question the long-term secular trend of electrical and heavy utilities and solar and everything else that just right. Right now and as we go into next fiscal year, it's a little bit more challenging than what we probably expected a year ago..

And then can you talk a bit about inventory on hand or in the channel and where that sense -- is some of the price weakness due to excessive inventory -- is it all sort of demand driven based upon competition in imports?.

I'll start. Here's where I would say the following.

I'll almost right back to the utilities because one of -- again, well, two of the top largest customers just talking to customers all the time is with specifically utility, they actually figure, again, lots of things hooking up to the grid, weather putting in trenches that contractors are backed up and that's what's even slowing down distributors.

But overall, my sense is that if you were to look back, let's say, 2 or 3 years ago or whenever normal was before COVID, the actual inventories out there are about in line. Now that said, with pricing pressure, no distributors like the worst thing they can do is buy and devalue stock. They just don't make enough money to have that happen.

So I think distributors in general are trying to wait and even cut below normal levels. So I wouldn't say there is extra inventory but I would say if you could round off a week right now, distributors. And again, we're delivering well but frankly, so is our competition delivering well that you just don't need to have quite the level of stock..

And Alex, I would say that going into the quarter, I think everyone felt like their inventory levels were somewhat normal under their sense. But I just feel like their activity going out the door is less than expected and therefore, I do think that they have a little bit more inventory than they did.

So I think they felt like they were kind of in the middle of that right now and they're probably want to leak a little bit of that out, if that makes sense..

Your next question comes from the line of Deane Dray with RBC..

I also add my congrats to David. That sounds like a fabulous opportunity. And then congrats to John and James..

Thanks, Steve..

David, thank you..

I want to circle back on the situation on the Mexican steel conduit. I guess that constitutes dumping. And just to make sure I heard the number correctly, Bill, you said it now represents 20% of the market. Is that the right number? And if the....

That's correct..

But if the tariffs were enforced, what would that number be?.

So let me go without getting too geeky here because I could go for hours on this one. It's around 20%. Obviously, you can go up from there down, is it Mexico versus a little from some other country, all those other factors.

In 2 minutes or less, what happened when NAFTA switched to USMC, they took down the 25% tariff that was part of NAFTA and they agreed to not have award any surge in occurring. And over since that was done in -- the baseline 2015 to 2017, we're up around and again, depends on what year and things fold since then.

So it's grown 50% a year but it's compounded to the point of being significant. So if you go forward, Deane and say that hypothetically, the current administration or a new or a different administration was to implement back to what USMCA requires already written into contracts or to put a tariff in, that number could drop substantially.

And that's why it's hard to gauge next year with pricing. We don't have that built into our -- where we did mention the $650 million. So again, that's where in November, we'll have a little bit more clear buoyancy on administration, interest rates and things like that, it's a little tougher to predict a forecast right now..

Got it. But still, I know you've got a lot of moving parts between PVC and the steel situation.

The previous expectation was price normalization might be reached towards the end of calendar '24 that now feels like that's being pushed out based upon what you know today, where do you see the best case price normalization that would happen? Look, I know it's a fair question -- Mexico.

From what you know today, where would normalization happen?.

Here's how I would answer, Deane, with the first, the caveat but I'll get to your question, is I and David have mentioned for years now on calls. We live in a world with 2 weeks or less backlog and pricing changes every day.

But with the fine print there of a forecast, one of the comments I made in my prepared remarks is that we think next year would be the baseline. So to say, could some pricing drag on up, down, maybe.

But I think as you look forward and say organic growth and of the things we didn't call out as much as productivity that's actually strong, higher than budget, even with slightly more inflation.

We have strong net productivity and you look at our growth initiatives that will -- the gentleman earlier, David asked like about Hobart that are kicking in place in our global mega projects that I think next year is the baseline.

So I'm not going to put in pricing but I think it will become de minimis enough that the other things will drive ahead and we get back on track of growing earnings which obviously will be a strong reflection point for our stock that goes with every other fundamental of our company..

All right. I appreciate that. And just last question. What -- do you have any comments on some of the noise we're hearing about pricing in PVC? I hate to use that word collusion but really trying to figure out is this -- can this be substantiated, maybe if you could just start with some comments there..

Yes. So I'm going to tell you, first is if you saw some of this stuff going around, it's from a short seller says they're a short seller.

Indeed, to your question you've asked over the decade, I am so proud of our internal pricing mechanisms weekly call, scatter diagrams, apps that tell us pricing that -- we drive our business and I'm going to claim that report is unsubstantiated from the conclusions it tries to make..

Your next question comes from the line of Chris Moore with CJS Securities..

Congratulations as well to David. Most have been answered but maybe just one more on pricing. Certainly, seems like on a relative basis since the pandemic began pricing on PVC has increased more than any other product. Obviously, it's come down significantly.

When you look at relative price risk for fiscal '25, is it still fair to think that PVC pricing still represents kind of the biggest pricing risk moving forward?.

Yes. I'll give you a little bit more color but the answer is yes, Chris. And again, if you go back to COVID time, with supply demand constraints which drives our business, this has been a constant theme since Atkore existed. All of our products that I can think of all went up in margin.

So did both our competitors and other industries, maybe not as much.

But then with PVC, if you go back around COVID, you also had a hurricane hit and that my timing could be a little off here but 4 or 6 months later, you had the freeze in Texas that we just had an abnormal thing that therefore allowed more opportunity for someone to say, hey, drop your price pick it 30%, 5%, try to fill my factory, then if you're up 10%, there isn't as much opportunity for somebody to try to drop their price.

So, a long way to reason. That's the dramatic thing that's happened in PVC. But yes, I do think it's PVC and then we'll see how conduit plays out. But at least in this quarter, I think we appropriately scope that.

And to Deane's earlier question or the words in Deane's mouth, administration's focus on the future and just enforcing a contract that's already been there that, quite frankly, some of our very large corporate competitor CEOs have called out in their earnings..

And Chris, one other thing to remember during that COVID times, not only was there a supply chain disruption but there was a very strong demand. For me, I think that's -- we don't talk enough about the end aspect of pricing. If we had that type of demand right now, I don't think we'd be talking about pricing like we're talking about today.

So I think in that regard, the reason why we would say PVC for next year is probably just more uncertainty around the PVC market for next year as it goes and it affects pricing..

Yes, David and I don't have the number in front of me but just to echo that. And again, everybody, these are public stuff but to go single-family homes, it's an average market if you look at some of the information but no sub developments are being built.

And I'm winning a number here but you get back to 1.2 million a year, starts versus 900,000 starts. All this stuff, people unfortunately look at how are they doing on volume, what did they estimate, who are their bosses and stuff above them.

And you start getting the Fed dropping rates, the residential picking up some ifs there that why we didn't pay these into a forecast for next year. But pricing could easily go up. But at this stage, I want to still stay around what we just said at the $6.50 stage..

And Chris, one other aspect in Bill referenced this a little bit as opening comments. So when you look at the market right now, kind of the overall construction market, it is made up of large projects becoming a larger piece of the overall activity. And when that happens, two things happen.

One, typically, the larger projects are a little bit more price competitive to begin with. But when there's not all these other opportunities kind of broad construction activity it gives you less opportunity to do your pricing by location and so on and so forth. So I think that element right now, we're feeling that in Q3 and going into Q4..

Extremely helpful, guys. Maybe just a last one for me. So $650 million is obviously a target could come up could come down. Any kind of EBITDA margin range that accompanies that..

David, do you want to....

I think basically the way that we try to approach the $650 million is we feel like that's kind of the minimum base, Chris, going into next year. So I think that's our viewpoint as we sit right now. I do believe that going into November, we'll know a lot more. The team here will do a lot more going into November with the uncertainties exist right now..

Yes. But I think to the margin thing, we focus more on year-over-year and quarter collections that we answered earlier versus trying to do a margin depending on. Obviously, margins somewhat depend on as could help us on what our revenue is. And things like steel costs.

Again, I want to emphasize cost is the least factor of things of market demand, competitor actions and our value prop but like steel costs are dropping, so one could think our revenue could be down if we make even the same price per ton. But again, Chris, the specifics will get into....

Broadly speaking, not too far out..

No, I'm not [indiscernible] anything, correct?.

I mean one thing we couldn't -- I mean S&I is starting to get up into that mid-teens again which I think is certainly helpful also for the enterprise..

Your final question comes from the line of Chris Dankert with Loop Capital..

Just again, congratulations, David and thanks for all your help here.

I guess, first off -- and sorry for specifics but I guess as far as the Hobart ramp goes, any sense that you can give us for kind of what the utilization rate is today? Obviously, you said you were hoping to get there sooner but are we at 50% utilization today and that continues to ramp fully into '25..

Yes. No, it's higher than that, Chris, without getting into a precise number. And then you got two things going. So, definitely north of 50%. But plus remind some we give you a wide range here but I like to use the 70%.

So yes but I don't want to lock because Chris, there's a little bit with almost like my answer to the Mexico with Deane and so forth is we get in this thing called OEE.

Do you account the fact that preventive maintenance in that number? Do you the account that we're not working, just starting a third shift but we're not working 4 shifts year round on the clock weekends or how quick we change over and so forth. So we're ramping up. It's definitely above your 50% number.

But as we go into next year, there's still growth, again, not locking numbers but could we grow 20%, 30%? And the answer is absolutely, that volume..

Got it. That's extremely helpful. And then just finally for me, I guess, any update on kind of [indiscernible] program funding timing? I know New York and California have finally got some stuff stood up.

Any anecdotal commentary there or kind of how that could impact HDPE volumes into next year?.

Yes. So great question, Chris. All the questions are great but I can't imagine if we would have went through the sell-side questions to not hit that. I think cautious optimism. I'm going to put it -- which we've always said in '25, I'm going to put it because it all gets on when -- what's the ramp that you call it success.

I'm going to put it more into calendar '25 than fiscal '25. But to your point, 2 states have approved it, other states are closed, whether it's the people making the fiber optic or one of our very large competitors in that segment are all saying the end of this calendar year and so forth. So I think we've been cautiously optimistic in our guide.

We're going to expect to see profit pickups from next year. But I will say, it's definitely going to be a ramp through '25 and '26..

This concludes the question-and-answer session. I would now like to turn the call back over to Bill Waltz for closing remarks..

We shared today our perspective on several challenges that are currently impacting us and that may continue to impact us in the midterm. Despite these challenges, we have conviction in our people, our strategy and our processes which are the 3 fundamentals of our business system and enable us to remain resilient and focused on the future.

With that, thank you for your support and interest in our company. We look forward to speaking with you during the fourth quarter call in November. This concludes the call for today..

This concludes this conference call. You may now disconnect..