Ted Jackson: The main question I want to ask is going back into your commentary, Scott, you had first of all, if there’s actually a presentation for the quarter, I’m not sure it’s on your website. When I go on your website, I see in a August presentation. I think it hasn’t been updated, but perhaps I’m wrong.
Scott Montross: Yes, I think it will be updated soon. Sorry about that.
Ted Jackson: Okay. In terms of – no, it’s okay. I mean, I’m a mellow guy. In terms of questions, Scott, you had talked about a pickup in bidding activity for 2024. But because of the [indiscernible] bidding activity, if you would, in 2023, more margin pressure. And I wanted to kind of unpack that a little bit on two fronts. And – number one is, I mean, you’ve had some nice margin business booked in your backlog that we’re seeing the benefit of. So maybe you can talk about reference back to kind of what you see the impacting of your margin structure is from that. And then – I mean, that’s the negative side of this, but the fact of the matter is that the bidding activity for 2024 looks to be relatively robust. How does that play out in terms of your backlog as you roll through the year?
And then can maybe some color with regards to kind of the drivers behind that bidding activity? I mean, is it a result of some of the government funding coming into the market? Is it a regional thing based on states maybe some just some color around that? That’s my first set of questions.
Scott Montross: The – to take the last one first because, I’m not sure I’m going to remember all of those, Ted. I think that the IIJA funding, a government funding starts to take a little bit more hold as we go into next year. But really, probably the bigger part of that is out at least a couple of years. Right, it these are just projects that we’re actually seeing coming through the system. We’re in our strategic planning process right now. And we’re looking at everything that’s coming through our project tracking system, the things that are likely to bid that things that may not bid. And obviously, when we look at those things, we give the things that we don’t think are that likely a pretty good haircut to come down.
And we’ve come up with a number that’s quite a bit bigger than what we saw in 2023. So that looks good. But that’s not – I don’t expect the IIJA funding really to start really kicking in until probably 2025. So that’s really – that’s a ways out still. This is just stuff coming through. And I think the exciting thing about this, I think I said this before, Ted, even with a really small market – and we’ve seen a couple of pretty small markets over the last couple of years. 2021 was a market similar to this size that we’re seeing this year. And while the margins are not great, they’re still okay coming through this period. And if you look back several years ago when we had markets this size before some of the market consolidation happened, the margins were really, really ugly.
So that’s a piece of the excitement that we have going forward, especially looking at bigger markets. So when you look at margins and how those things play – and I think this is a little bit to be your first part of your question, and you’ll have to remind me about some of that. When you get lower bidding environments like we’ve seen this year and like we saw in 2021 what ends up happening is backlog start to go down, because there’s less bidding and people putting less in their backlog. So it starts to become more of like, hey, there is starving animals there and they’re all after the piece of meat, right, at some point. So that creates some pressure on the margin. And we’ve seen some of that over the last few months, really since probably the last earnings call, that kind of pressures things down a little bit.
A lot of the stuff that we have in backlog has really good margins. I think some of the things that create a little bit more margin pressure in specific periods of time is when you get something that moves out like the thing that we talked about earlier that moved out of the third quarter into the first quarter of 2024, you’re scrambling to find something to put in there that may not have as good of a margin and you have lower overhead absorption because of that. So it’s a double whammy on your margins. So there’s a whole bunch of factors that go into this. And really, our production levels in the third quarter for Steel Pressure Pipe have been pretty small, right? And again, even with them being that small in all the anomalies that we had being able to come through a quarter like that with a margin that’s just halfway decent is exciting and bodes well for how things look when the market starts to really get bigger.
So – okay, so you’re going to have to go back and remind me the other pieces of your question.
Ted Jackson: Well, it’s more of a discussion than a question and you’ve gotten into a lot of it. But if I take what you just kind of laid out to me and listen, – is it fair to say that when you’re talking about a lot of the bid activity, – this isn’t like you’re saying this isn’t a big government project. This is more kind of smaller projects and that the fact that you haven’t had a big set of government projects, you just have a lot of people competing aggressively for this smaller business. And that is when you talk about 2024 is you’re seeing – you’re talking about really kind of these smaller not mega projects, but smaller kind of bread and butter pieces of business that, that’s the activity that you’re talking about.
Scott Montross: Yes. But we’re still seeing some bigger projects that are on the website in 2024. There are some big things out there. We’re just seeing more smaller ones. Generally, smaller ones don’t get as much pressure as the bigger ones. And they are generally all municipality or utility related. So in some way, shape or form, government sponsored at least to some extent, whether it’s state or federal funding that goes into those but there’s all kinds of different dynamics. But what I’ll say is on the larger projects, Ted, those are the ones that generally get more attention and become more, what I would say, nationwide bidding attractions. The smaller projects are more regional attractions. So unless you have one region in the country that’s really slow, those are generally how do I want to say this, a more reasonable bidding environment because they are smaller projects, but the big ones attract more attention for sure.
Ted Jackson: But I mean – and put it all together, it sounds like there’s a pickup in activity you have and then you’ve got a longer-term drive with a lot of the infrastructure funding. And I guess the tone I’m reading is you’re moving through the end of 2023 and into 2024, feeling pretty good about the current level of business and then the longer-term demand for your services and products through 2024 and into 2025.
Scott Montross: Yes. I think that’s right. I think the reality is, Ted, is that 2023 has been a small bidding year. 2022 was a bigger bidding year, probably maybe 30% or 35% more than 2023. 2021 was like 2023. So we’ve had three probably okay bidding year, one okay bidding year in that timeframe and two smaller ones, and we’re still coming out the way we’re coming out, and we’re expecting bigger bidding years in 2024 and 2025, especially with the IIJA funding, which could add several thousand tons of business to your backlog during a period of time like that, depending on how these things come out. So we’re pretty excited about how things look going forward on the Steel Pressure Pipe side with the markets that are coming at us.
