Thank you for standing by. This is the conference operator. Welcome to the AGI Q1 2022 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Tim Close, President and CEO of AGI. Please go ahead, sir. Good morning, and thank you for joining Jim Rudyk and I to review our first quarter results and our outlook for 2022. With 2021 serving to validate the benefits of a diversified business model, that trend has continued into the first quarter of 2022. Sales and adjusted EBITDA were up 14% and 6% year-over-year, both setting first quarter records despite two significant headwinds in key areas of our business. Last year's drought in Western Canada had a significant impact on our farm business, which is historically an anchor for our Q1 results. 2021 crop production volumes dropped materially in Western Canada, with wheat, Canada's largest crop, down 40% year-over-year. As expected, this type of decrease in crop production had a material impact on our business in the region. In addition, our digital segment was a material drag on adjusted EBITDA in the quarter despite record order intake as supply chain constraints impacted our ability to manufacture product to meet demand. Supply chain issues pushed some revenue recognition into Q2. Our investment to continue to build the digital team to support our ambitious digital growth plan also contributed to the higher drag in the quarter. Our first quarter results, despite these two impacts, highlight the strength of the now well-diversified AGI. With three of our last five quarters setting adjusted EBITDA records, our results continue to validate our recent investment phase leading up to 2021. This stable foundation is important as we move into the next phase of AGI's evolution and focus on deep integration, optimization and organic growth. Now we'll turn to some highlights from the quarter. Brazil continues to be a tremendous success story for AGI. Sales were up 75% in the quarter against a strong 2021 comparable. Our backlog for South America is up 6%, but we also have a very strong pipeline that features a wide range of small, medium and large projects that will continue to fuel the growth of Brazil throughout 2022 and going forward. Looking ahead, we expect a sustained trend of strong demand and sales growth in Brazil. The grain, fertilizer and general food infrastructure gap in Brazil is massive, and this market has many decades of strong growth ahead. Our commercial platform grew 17%, with Canada, the U.S., EMEA and South America all leading the way. In Canada, our commercial sales and backlog were up 63% and 119% respectively. The commercial market was slow over the last couple of years following a heavy investment period for the grain and fertilizer industry in Canada. Current dynamics have led to an increased spending cycle, which has been very supportive to our sales and backlog. AGI is well positioned to capture much of this demand, and we expect continued momentum for the Canadian commercial platform. The EMEA region posted 18% overall growth in the quarter, anchored by 48% growth in the commercial platform. Midway through the quarter, activity on projects in Russia and Ukraine largely came to a halt. Ukraine produces significant grain export volumes, which are critical to global food supplies. Our relationships with Ukrainian customers go back well over a decade. Going forward, the industry in the region will recover. We are well positioned to participate and support in a rebuild and expansion phase. In the meantime, we have pivoted our efforts and have already replaced the value of the impacted projects in Russia and Ukraine with new work sourced elsewhere within the EMEA region. Strength in India continued, with sales up 33% and backlog increasing 31%. We continue to expand our rice processing system export sales from India. We have also finished the installation of a new grain production line in India. With the substantial reduction of wheat production and exports expected from Russia and Ukraine, India will now increase wheat and other grain production, leading to substantial opportunities for AGI in the region now that we have grain storage production in the country. The farm segment sales grew by 6%, though as I mentioned up front, this includes overcoming a major hurdle with a 31% sales decline in Canada as the Western Canadian market faced extremely challenging growth conditions in 2021. The challenges were felt across the industry, and AGI was able to retain market share in this key market despite the temporary dip in sales. The impact of last year's drought will have a carryover effect in the first half of 2022, but as we move into the new crop season, the Canadian farm market will rebound. The growth in the farm segment was largely the result of strong contributions from the U.S., and Brazil. In both markets, we continued to grow market share in permanent grain systems. Additionally, in the U.S., portable handling equipment was a key growth driver as the combination of an expanding dealer network and overall low dealer inventories supported robust demand for AGI products. Our food platform continues to be an area of very high growth, with sales up 62% in the quarter. Given the purchase of Eastern Fabricators in January, there is an element of acquired revenue embedded in the quarter. But the results also include strong organic contributions, which are representative of the significant demand we are seeing in this market. Throughout 2022, we see the pace of growth continuing as supported by significant backlog growth, which was up 153%. With the strong backlog in hand, the near term priorities for our food platform will be on the Eastern Fabricators integration with a focus to build on early wins for revenue synergy capture, in addition to recruiting as we continue to build the team to keep pace with significant demand. AGI Digital sales were up 8% in the quarter. However, as I mentioned in my opening remarks, this does not fully reflect the strength in this segment as chronic industry-wide chip shortages constrained our production. Q1 was a record quarter for order intake following our focus to expand the dealer channel through 2021. However, from a timing perspective, the chip shortages delayed some key revenue recognition into Q2. The combination of strong order intake, expanded sales channel, and additional resources to help drive growth sets up a positive outlook for AGI Digital. Supply chain challenges continue to impact the global economy. As discussed for most of 2021, supply chain dynamics for steel is an area we closely monitor, and we've made dynamic adjustments to manage our supply effectively. Through the Q1, we saw lead times for steel improve marginally in most regions. Overall, steel pricing remains at elevated levels causing a corresponding increase in working capital investment. Outside of steel, we are seeing more pronounced inflation for freight, components, and labor. However, our supply chain dynamics are manageable. We do not foresee a material impact to our margin profile. Overall, our record Q1 results and current outlook confirm the ability for our diversified business to mitigate the impact of regional issues while maintaining robust growth. We have increased confidence in our outlook for 2022, which we expect to be another record year for AGI. One final note before I turn the call over to Jim. I'd like to reiterate AGI's support for the people of Ukraine. To show our support and help address the humanitarian crisis, we launched our Step Up for Ukraine collaboration in early April with the goal of delivering urgently needed medical supplies to the country. Thus far, we have raised over CAD 750,000, and we are delivering high-priority supplies into Ukraine. We are in the process of arranging additional deliveries and remain committed to providing ongoing help to those impacted. A special thanks to our AGI team for stepping up to quarterback this great initiative. I will now turn the call over to Jim for further discussion of our Q1 results. Thanks, Tim, and hello, everyone. For today's earnings call, I'll cover three topics. First, I'll provide a brief overview of our Q1 results. Second, I'll discuss our balance sheet. Finally, I'll provide an update on our outlook for 2022. Our Q1 results continued the momentum from a record 2021, with record Q1 results for both sales and adjusted EBITDA, an impressive result, especially when considering the headwinds we needed to overcome to generate this result. Consolidated sales of CAD 292 million were up 14% from CAD 255 million year-over-year, with growth in all segments and all geographies except for Canada. Adjusted EBITDA of CAD 41.3 million was up 6% from CAD 39.1 million year-over-year. Adjusted EBITDA margins of 14.2% were down approximately 110 basis points from 15.3% year-over-year. It is important to note that there was a significant change in our input cost structure in comparing the year-over-year results. The input costs used to support Q1 2021 sales were purchased largely in late 2020, ahead of the steep increases in steel prices. While we are generally able to pass along input cost increases, our ability to largely preserve margins despite the extremely challenging environment is a significant accomplishment. Farm segment sales and adjusted EBITDA grew 6% and declined 2%, respectively, in the quarter. Segment adjusted EBITDA margins declined from 25% to 23% as the rise in steel prices did have some impact. We are extremely proud of these results, given we were able to overcome a very challenging quarter for the Canadian farm segment, which is typically strongest in Q1. Despite the headwind, our U.S. and Brazilian divisions were more than able to make up the difference and led to a phenomenal quarter for the farm segment overall. As farmers in Canada recover from the extreme drought from last year, we anticipate results to recover throughout 2022. Commercial segment sales and adjusted EBITDA grew 24% and 40%, respectively, in the quarter. Adjusted EBITDA margins expanded from 12% to 14% as overall higher volumes benefited both gross margins and our ability to scale our SG&A base for the segment. The digital segment posted sales growth of 8% in the quarter. Adjusted EBITDA of -CAD 4.8 million is up from -CAD 1.4 million as we invest in building the team in preparation for rapid growth and further product development. As Tim mentioned in his remarks, we have begun seeing this growth materialize with record order intake in Q1. Revenue recognition and timing was delayed due to chip availability required for production. On balance, we expect strong growth in the digital segment in 2022 and aim to be EBITDA neutral by the end of the year. Turning to our balance sheet. First, I'd like to highlight two key announcements made subsequent to the quarter. We announced a credit agreement amendment for our senior facilities that will provide us with more flexibility to meet the needs of our growing business, particularly in international geographies. Importantly, the interest rates on these facilities will remain essentially unchanged. We'd like to thank our long-standing members of the lending syndicate for their continued support and extend a warm welcome to four new members to the group who will help add depth of service and coverage to AGI. In April, we closed a convertible unsecured subordinated debenture offering with net proceeds of CAD 99.7 million, including a partial exercise of the overallotment option. The proceeds will be used to redeem the prior issuance of convertible unsecured subordinated debentures due December 2022, with an aggregate principal of approximately CAD 86 million. The difference will be allocated towards pay down of senior debt and general corporate purposes. The coupon of the newly issued debentures is 5.20% per annum, 70 basis points higher than the debentures being redeemed. Turning to key balance sheet metrics from the quarter. From a working capital perspective, our investment in non-cash net working capital investment increased from CAD 143 million to CAD 232 million year-over-year, and also grew as a percentage of sales moving from 14% to 20% on an annualized basis. This increase was driven primarily by our strategic investment in inventory. Given the ongoing supply chain, delivery timing, and availability of steel, we made the decision to invest in our steel inventory to ensure we can meet strong customer demand and maintain high levels of on-time delivery. In addition, the overall increase in the cost of steel further magnified the extent of the increase in inventory. We do not expect this level of inventory to be required as part of our run rate operations into the future, but believe that strategic benefits of a temporary investment in inventory are justified given the unique supply chain circumstances we are managing. In the short term, we expect our initiatives to optimize our accounts payable and accounts receivable positions to help offset some of the investment in inventory. We continue to closely manage our senior debt to EBITDA ratio, which sits at 2.9 x exiting the quarter. This is up from 2.4x from Q1 2021 year-over-year, and 2.5 x from Q4 2021 sequentially. We have sufficient room against our covenant of 3.75 x, and we do not have any bank covenant concerns. The increase is primarily attributable to the strategic investment we've made in inventory to support our robust backlog in the coming quarters. That said, we remain vigilant in closely monitoring our senior credit facility usage and overall cash flow management while also balancing credit facility usage to help enable growth, particularly in our international regions. While we are comfortable with our senior debt ratio, throughout 2022, we will continue to focus on free cash flow conversion and managing the overall balance sheet with a clear objective to continue deleveraging. On an all-in net debt to adjusted EBITDA basis, we expect the ratio to trend towards the 4x level from its current level of approximately 5.3x by the end of 2022. As previously stated, this will be achieved through a combination of disciplined capital management and the benefits of strong results in growing EBITDA. We have approximately CAD 186 million in available undrawn credit facilities, taking into consideration the credit agreement amendment as well as the repayment of senior debt in excess of what was required for the redemption of our 2022 debentures, and CAD 60 million of cash on hand. We closely monitor our liquidity position, ensuring we are flexible to react quickly to new opportunities. Finally, turning to our outlook for the upcoming year. Supported by a strong backlog, up 19% year-over-year and at record levels, as well as significant pipeline and quoting activity across many regions, we expect full-year adjusted EBITDA to be at least CAD 200 million in 2022, with growth weighted particularly towards Q2 and Q3 of the year. Thank you very much for your time. With that, we'll turn it back to the operator to take questions. Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press Star, then one on your telephone keypad. You'll hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star then two. We will pause for a moment as callers join the queue. Our first question comes from Jacob Bout of CIBC. Please go ahead. Good morning. Hi, Jacob. The first question is on margins. You know, just given the current environment we're in with you know the inflation pressure, supply chain constraint issues, steel costs, is your expectation margins are gonna be higher or lower year-over-year? Do you think you can get to 15% margins, EBITDA margins for the year? Yeah. Good question. In Q1, you do see, if you're talking EBITDA margins, you see us declining year-on-year slightly, but gross margins fairly consistent. A big factor of that is our investment in SG&A that will benefit significantly as volumes increase through Q2 and Q3. We're right on track to where we need to be. As you recall, we guided our margins to continually tick up between 100 and 200 basis points over the next couple of years. This year, we see us to be slightly higher than our historical or last year's adjusted EBITDA margin based on what we see right now, even despite all the challenges in the supply chain. You know, we've gotten fairly good at being able to react and manage through a combination of pricing initiatives and procurement and operational approaches. Okay. My next question is just on Ukraine, and I think you highlighted in the historical relationship you've done there, you know, considerable amount of work that AGI has done there historically. Given the intel that you're hearing right now, how much damage do you think has been done in that area as far as agricultural infrastructure? How long do you think it's gonna take to rebuild and how big of a role do you expect to play in the eventual rebuild? Yeah. Good morning, Jacob Bout. Well, we don't have perfect information like everybody, but we do have our team on the ground there that are giving us fairly unique insights. I think you know I expect a very heavy damage. I think Odessa is being targeted currently, has been and will be where there's much of the infrastructure exists. Look, I think it's pretty grim. I think the outlook is for a lot of damage to that infrastructure. Most of the work we've done is in the commercial space, both at the port and then inland, I think, and it has been targeted. Coming out of this, I expect it'll be years. You know, we spent better part of eight years, ten years doing projects there, and I expect that it'll take that long to rebuild whenever we come out of this. I think we are very well positioned. We continue to increase our commitment to the area from a team and resources perspective and ability to operate. We expect to be a big part of the eventual rebuild. Good to hear. Thank you. Our next question comes from Michael Doumet with Scotiabank. Please go ahead. Hey, good morning, everybody. Morning. My first question is on the margin profiles of farm versus commercial. Historically, Tim, if I remember correctly, I think you suggested that the margins of the two segments were roughly similar. You know, we saw a nice improvement in commercial this quarter. Should we expect the margins of the two segments to eventually converge? I'm just wondering if that's part of the 100-200 basis point margin improvement story in the next several years. Yeah, no, I'm sorry. I don't, Michael, I apologize if that suggestion has been made, but, you know, the farm margin profile is very different than the commercial margin profile. You know, one of the unique things about farm is our portable business there. If you recall, our farm business is comprised of two types of products, one we call portable, and then another one we call more permanent. The permanent side of the farm business trends more towards the commercial margins. The portable side, though, is much higher margins. To the extent that the portable sales weigh in on the mix, you'll always see the farm segment reporting higher margins overall. In terms of our recovery, though, for the business overall, there's a few factors that'll be benefiting it. One is the scaling of SG&A. A lot of the investments we've made will continue to benefit the increased volume that we continue to see running through the system. In addition to that, you know, especially if you're looking versus last year, the last two years, we've reacted very nicely to create processes and approaches to ensure our pricing more quickly reacts and adapts to the variability in a lot of the input costs, particularly steel. That will benefit the commercial segment in particular as margins will creep up. You saw that in Q1 this year, where margins increased quite healthily. That's really the story on why overall corporate margins will trend higher. You get the SG&A benefit of scaling and then slight benefits in some of the gross margins as we've adopted better practices to ensure that any variability in the cost inputs get matched with offsetting price increases. That's really helpful in terms of commentary. Thanks for that. I guess the second question, you know, commercial sales in Canada, that was down, I think, 30% last year versus 2020, and much more versus the prior year. It's nice to see activity and backlog increase here. Can you give us a sense or maybe provide some context in terms of the medium-term outlook and maybe sort of what levels you expect to get back to? Yeah. In Canada, you're right. We've talked about this a number of times where the last couple of years, expectedly, given the high period of investment in the 2017, 2018 years in Canada, and the COVID challenge, you had a bit of a delay or pent-up buildup of demand for commercial projects in Canada. We've been talking about our robust pipeline for the last couple of quarters in Canada, and that's starting to materialize. You know, we continue to see very strong pipeline both in and around the world, but particularly in Canada, given it coming off a couple of years of delay in the project. From an outlook perspective, you know, we certainly have visibility through the rest of this year of commercial in Canada continuing to remain strong. Perfect. I'll just sneak one last one in. Again, on Canada, can you talk about the inventory levels at the dealer level, as it relates specifically to farm equipment? Yeah. Look, if you're looking at just Canada, our dealer levels are, you know, I'd say normal or maybe slightly less than normal levels as the Canadian market comes out of that drought. Dealers are cautious and looking for activity in the new crop cycle, which is positive. There's moisture, some cases much too much moisture, but good expectations for planting, good expectations for crop volumes. I think the Canadian market cautiously optimistic, and we'll see some restocking as we move into Q2, through Q2. You know, more or less the same in the U.S. We want to broaden that question a little bit. We'll see inventory levels at very healthy levels, probably less than normal, slightly less than normal. We'll see some restocking. Some increased order intake as we, again, like Canada, as we move through Q2. Perfect. Thanks, guys. Thanks, Gordon. Thank you. Thanks, Michael. Our next question comes from Gary Ho of Desjardins Capital Markets. Please go ahead. Thanks, good morning. First one, just want to get an update on the dealer penetration in the U.S. farm permanent space. I know that has been a key focus for you. Any targets you can share with us with respect to how many dealer relationships you hope to achieve, let's call it, you know, over the next two, three years, so we can track the progression on this? Yeah. We continue to make really solid progress in the U.S. market, onboarding new dealers, expansion of share within dealers. Both of those coming along very well. We don't have a public KPI for that, but you know, we can tell you that we're very satisfied with that progress and you know, aggressive targets and expectations internally around development of that sales channel. So it's come along very nicely. Expectation is for solid results in 2022 and going forward. Gary, one data point for you to reference, you know, we do track sales in the U.S. specifically just in the farm segment. Without a specific metric on just new dealer conversions, you will appreciate that, you know, the U.S. farm segment grew 19% year-over-year in Q1. A good chunk of that is certainly our current dealers buying more, but also there are some new dealers in there. You won't have those types of growth rates without our ability to start converting dealers. Okay, great. That's helpful. Second, in your prepared remarks, you mentioned digital a few times. Maybe you can elaborate on the headwind this quarter. How do you plan to resolve the chip shortage issue there? And perhaps can you quantify how much was pushed into Q2. A combination for resolution is new sources of supply. The industry is dealing with the shortages and coming out of that, or easing of that, those constraints. We have redesigned some components, some products to be able to manufacture with more readily available components. That's now put us, you know, for instance, we don't have those constraints now in Q2, currently in Q2. Unless something changes drastically, we should have unfettered ability to produce in the quarter, in Q2, Q3 going forward. Yeah, we haven't quantified the push, but it was material and did result in a larger drag or burn in the quarter for digital. You know, with the expected sales that we should have had in Q1 would have you know you get above an operating leverage of a point, and we would have had much better results in the quarter. That's okay. You know, it pushes to two and then two and four, and going forward, we have very good expectations and forecasts. Okay, perfect. Just lastly, more of a numbers question, just on the leverage side. You mentioned, you know, a step down from the current total leverage 5.3 x to four, roughly 4 x by year-end. Can you help us kind of bridge that gap? How much would be kind of EBITDA growth? How much would be winding down of the working capital, and/or other buckets? The working capital will reverse significantly as we work through the year. You know, part of the growth, as I talked about on the call, was strategically making sure we had the supply as we've talked about and as we've shown in our material. Our backlogs continue to be at record highs, and our pipeline is very strong. We have very good visibility to the sales coming through the pipe and committed orders. We wanted to make sure we had the inventory to not delay any production and shipments of that goods. We took that decision. It's significant. If you look at inventory alone, it grew versus last year at this time, almost CAD 90 million. That's an unusual growth and typically not generally required under normal circumstances. You know, with the drastic cost increase year-over-year and then the supply chain challenges, we decided to do that effort. A good chunk will come from working capital management. A significant amount, as you if you just run through the numbers, given our outlook guidance, we will benefit from the strong growth in EBITDA as well. Okay. Great. Those are my questions. Thanks very much. Our next question comes from Andrew Wong of RBC Capital Markets. Please go ahead. Hey, good morning. Just wanna ask about the backlog. I remember when it was first introduced, they were comping against market conditions that included COVID and steel pricing, which kind of impacted a lot of the numbers, so it was a little bit more difficult to use the backlog figures except for, you know, directionally telling us things are getting stronger. Now that we start to analyze some of those impacts of COVID and steel, there's still a little bit of that, but it seems to be normalizing a little bit. Are these backlog figures a little bit more representative of the potential revenue growth from the different segments? How do you expect those, the backlog numbers to kind of evolve over the next few quarters? Yeah. Well, interesting question. I mean, as the business has changed, growing around the world and by product and end markets, there are a lot of dynamics in that backlog. Is it representative of growth? I mean, the backlog can go up and down in a quarter, doesn't necessarily correspond to the sales growth. I mean, the duration is changing in terms of that backlog. As we add more commercial projects, more food projects, international projects are longer dated, we might be booking into 2023, for instance. It's not that simple, unfortunately. More so I think our color around the backlog is as important as the number itself. Really what we're focused on is that backlog and the pipeline. Very important that our pipeline today, the quality of our pipeline, the visibility into that pipeline is for us as important as the backlog, and our win rates within the pipeline. For us, it's more around our characterization. Our view as to whether that backlog supports our outlook, which it definitely does. There's, I think, too many moving pieces at this point to have that direct correlation. It has to be augmented and informed by our view and opinion of both backlogs as it translates into outlook. No, that makes sense. Just maybe looking at Brazil, what's the mix there between market share growth versus some of just the broader market strength that you're seeing in that region? What kind of impact might there be from the volatility in the real? Great question. Unfortunately, another complicated answer for you. The market itself is growing very healthy growth there overall. For us, it is a, I'd say, you know, if I had to ballpark it, I don't know, I'd probably say 50-50 there. Our growth being a result of overall robust conditions, but market share, maybe that's too simple. It's probably majority is market share gains and then augmented by a quickly growing market. If you look in Q1, 75% growth, that's mostly market share. Then as we look forward, I think we'll see, you know, as we grow, the market share will moderate and we'll steer more towards that growth. That's probably quite a few quarters out. Okay. I only ask because one of the strategies I think I remember was AGI kind of introducing a lot of different equipment or just different platforms that maybe are better or weren't really introduced previously in that region. You know, part of the thesis was also you can gain some market share with the better equipment and the different platforms and things like that. No, there's a component of that. We have some unique solutions in commercial. The market in general is catching up. We have some on the farm, but it was largely focused on commercial. The market itself continues to evolve and change and grow. Some good, healthy competition in Brazil. I think we have quite a runway to continue to gain share in a quickly growing market. Okay. Thank you. Our next question comes from Tim Monachello of ATB Capital Markets. Please go ahead. Hey, good morning. Just a follow-up question on Russia and Ukraine. I just want to understand, I guess, what's happening to displaced volumes, I guess, principally for wheat and other grains in the region. You mentioned India, but is there any other areas of the business where you're expecting to see you know, more investment in storage infrastructure as a result of this conflict? Perhaps also just a greater focus on supply and security of our supply. Is that impacting you know, people or countries' willingness to invest in strategic storage infrastructure? Yeah. Thanks, Tim. Well, that's a global story. You know, there will be more redundancy built into the entire supply chain worldwide, back to North America, for sure. I mean, wheat production will increase in North America, in Brazil, into other parts of the region, in India. In India, for sure, they have a substantial ability to uptick in production of wheat and other grains. Look, in India, Northern Africa, we're seeing a lot of activity around food security and going from a pretty low base on infrastructure. They have substantial investment to make there. We're very busy in the region. In fact, a lot of what we mentioned some of the projects that have been postponed in Ukraine and in Russia, principally Ukraine. We've already made up for that in those delayed projects and the value of those. Some even places that are focused on food security are investing around that same theme. I think, you know, globally we'll though we're seeing an increased propensity to invest in increasing supplies on hand. It is weighted to regions that have very little today, and they're just getting to a reasonable level. It is a general theme globally. Okay. Is that a trend that you expect to play out over sort of a medium term period, or is there sort of an initial reaction that people are shifting investment and trying to, you know, build out infrastructure? Yeah. to replace the volumes that, you know, were coming out of Ukraine and Russia? Yeah. Well, it's a good point. No, this will be decades. Like, the amount of infrastructure needed in emerging markets is huge, and it takes substantial investment in order to just get to sort of 1% of supplies or production or, you know, a 1% increase in crop stored at farm, for instance, in North America, it just takes a massive amount of infrastructure, storage handling and otherwise, across the chain. These are big statements when the industry says, we're gonna have more crop stored at farm or more redundancy, more storage available, that represents, you know, decades of investment. Okay. Second question, just a follow-up on the working capital build in the quarter. Understanding that's strategic in nature, but you saw backlogs building pretty significantly throughout 2021, and there was supply chain issues there as well. Curious what, you know, changed the mentality around, of, you know, building up that inventory. Secondly, the thought around, you know, reducing inventory levels throughout the rest of the year, is that contingent on, supply chain issues mitigating and backlog stabilizing? Yeah. Thanks, Tim. Two reactions to that first question. The differences versus last year, one, cost. In Q1 in particular, steel costs, if you follow the charts and the trends, depending on what region we buy in, anywhere from 70%-100% higher on a cost per ton. A lot of the cost increases, as you know, affected us through Q2 and Q3 last year, when costs continued to increase very dramatically. That's one factor that would have weighed into the difference. The second factor is the war. You know, last year throughout the year, we did have COVID challenges, which we were getting comfortable managing through. You know, the unique dynamic now is the uncertainty that's created because of what's going on over in Europe. That's another factor that has caused us to be a little bit more on the conservative side to protect the inputs and the raw materials that we need for the orders that we have. Your second question, what was that again? Just remind me. Just around the thought process around that mitigating or I guess working capital coming down throughout the rest of the year. Is that contingent on supply chain issues, you know, getting better? The cost year-over-year impact will be muted. Actually, it should turn the corner starting in Q3 as cost year-over-year should be lower than the prior year, so that'll help from a cost perspective. From how we react given what's going on in the world, I don't know. I mean, I don't have the crystal ball, but what we know now, you know, we're starting to see supply chain getting steel starting to stabilize, getting back to more consistent levels as the world adjusts. That will impact our strategies and our plans as well in terms of potentially the need to stockpile a lot of steel. You know, I don't have a definitive answer 'cause I don't know what really the world looks like, you know, month to month, what's going on over there. Great. Okay. Well, that makes a lot of sense. I appreciate the color. I appreciate the time. time. Thanks, Tim. Once again, if you have a question, please press star then one. Our next question comes from Anthony Linton of Laurentian Bank. Please go ahead. Hey, good morning, guys, and thanks a lot for taking my questions. Good morning. Just wanted to start with a clarification, from one of your prepared remarks. I think you talked about the digital segment moving towards EBITDA neutral. I'm just wondering if that's on by the end of the year. I'm just wondering if that's on the full year on a quarterly basis, and then just some of the moving parts to get there. Yeah, on a full year basis. Yep. It's a combination of increase in sales as we normalize that production and catch up to some of the backlog in that segment, growth in the overall business, and you know, along with an increase, but you know, closely watched expansion of the team and the SG&A within that division. Yeah, the digital space is fairly, what's the right word? Seasonal, I guess, where Q2 and Q3 you see will be the bulk of our sales. It's not unusual that you'll lose or you'll have a negative contribution in the other quarters, Q1 and Q4. Q2 and Q3 benefit significantly by the volume. That's what we currently are seeing. For a full year, we're looking at tracking close to neutral. Okay. That's great to hear. Thanks for that. Just on the backlog, I was just wondering how the margin profile of the backlog, particularly on the commercial side compares to what you see today. I believe last quarter you talked about some lumpier projects, particularly in the international regions. Well, backlog is strong across the board, is up over really high comparable last year. We have, it's a very good pipeline as well. I mentioned how important that is, and it really is, more and more so backlog and the quality, size and quality of the pipeline. Both of those give us very high confidence around this year and certainly momentum moving into even next year. Particularly as it ties into our confidence in outlook in margins, as EBITDA margins and overall EBITDA results. Because it's such a strong level and because of our approach at supply chain management, we're very good at understanding and knowing what those margins will be. Okay, that's great to hear. That's all for me, guys. I'll turn it back. Thank you. Our next question comes from Michael Robertson of National Bank Financial. Please go ahead. Hey, good morning, all. Congrats on a solid quarter, and thank you for taking my questions. Just had a couple quick follow-ups. First off, just seeking to clarify the increase in the senior leverage covenant ratio from 3.25 to 3.75, was that on a permanent basis moving forward? The only caveat is to the extent we do M&A, that will get uptick. There'd be an uptick for, I think a one-year period post-acquisition. Got it. I would assume that, you know, supply chain snares aren't necessarily, you know, ubiquitous across regions. I was just wondering if there's any regions that, you know, were more difficult than others to, you know, be able to deliver on time, convert the backlog, you know, what sort of pressures you're seeing on a region-specific basis. Interesting question. Just thinking if there's one, if there's any standouts. I mean, Brazil has been a challenge more because we seem to be well ahead of our delivery dates or at least on time, you know, market that's not used to on-time delivery. So there's some components of it there, but certainly not supply chain related or due to anything on our side. You know, I think logistics continue to be a challenge around the world, for sure. So, you know, our team has got pretty used to factoring that in now as we're making commitments around timing. We talked about digital, that's certainly a component there. But then, otherwise, yeah, I don't see a lot. Yeah. The general thing that we see more of is, you know, believe it or not, just shipping our finished product to our customers, getting containers. You know, especially with what's happening over in Shanghai, you know, container availability has been difficult, and that can be region specific. Certainly, we've seen some struggles over in EMEA. All that's done is impacted the timing of the delivery to our end and our customer; it may shift it out. That's, you know, we've been dealing with those struggles now for a fair bit of time. It's slightly exaggerated now, but we're getting good at managing through it. Got it. That's helpful color. Thanks for taking my questions. I'll turn it back. This concludes the question and answer session. I would like to turn the conference back over to Tim Close for any closing remarks. Okay. Thanks for your time this morning. We'll close it up. We had some great questions. Just to summarize, you know, we're really pleased with the quarter. Great results given the components of the growth and the dynamics in the Ukraine region. Very solid outlook for the remainder of the year that you know, given the setup, the backlog, the pipeline, with increasing confidence around that forecast. Again, special thanks to all of AGI as we came together to implement and execute on our Step Up for Ukraine initiative. Thanks again for the time this morning, and we'll end the call there. Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.