Welcome to the Encore Wire fireside chat. My name is Jenny. I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press zero one on your touch-tone phone. As a reminder, the call is being recorded. I will now turn the call over to Brent Thielman. You may begin. Great. Thank you, Jenny, and good morning to all. My name is Brent Thielman, a senior research analyst with D.A. Davidson. I'm joined on the call with Daniel Jones, President, CEO, and Chairman of the Board, and Bret Eckert, Chief Financial Officer of Encore Wire. Shortly, I'll conduct a Q&A fireside chat with the management team. After the Q&A, we'll open the lines to questions you might have for management. Before we get started, though, Encore has asked me that I read the following statement on their behalf. Let me indicate that throughout this conference call, we may be making certain statements that might be considered to be forward-looking in order to comply with certain securities legislation. Instead of attempting to identify each particular statement as forward-looking, we advise you that all such statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed today. I refer each of you to the company's SEC reports and news releases for a more detailed discussion of these risks and uncertainties. Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful supplemental information for investors, are posted on Encore's website. With that, we'll get started with some Q&A. Wanted to focus initially on some of the demand drivers around the business. Talked about on your Q2 earnings call the drivers of incremental demand in the second quarter of 2022 compared to the same quarter last year. Clearly, Q2 of 2021 was a very tough comp from a volume perspective since there was pent-up demand last year as the country reopened from COVID. You still grew copper volumes 2.7% in the second quarter of 2022, which was impressive. Maybe could you just expand on the drivers of incremental volume in the quarter and how that's different from a historical driver perspective? Thank you, Brent. Yeah, great opening question. Yeah, I think another meaningful perspective for comparative purposes as we unpack this is recognizing that residential volumes, as we talked about before, were really at meteoric levels in the second quarter of 2021. It was a little north of 34% compared to residential volumes of 29.9% in the second quarter of 2022. That kind of highlights that the copper volume increase second quarter of 2022 to second quarter of 2021 is even more impressive. You know, as we stated on the second quarter earnings call, you know, the volume growth was driven by increased demand, data centers, healthcare, oil and gas, and renewable product solutions that we saw in the quarter. You know, specifically if you look at data center requirements that we've been seeing through the quarter, they continue to increase in size and scope. The increase in the product diversity, while the speed to completion really has never been faster. You know, that need for speed fits very well into our immediate order, immediate ship business model, and I think you saw the result of that in the second quarter. Our business model and culture allows us to quickly adapt, to pivot to the evolving needs of our customers while still ensuring quick shipments coast to coast. I think that was a differentiator that you saw still through the second quarter. Okay. Appreciate that. You know, this might have gone a bit under the radar. You know, I've covered the company a long time and noticed that you'd recently changed the business description. You've updated the investor deck to better reflect, you know, sort of the evolution of maybe your customers, your product mix. Can you just talk about how you see Encore in today's environment and sort of your vision for where the business can go from here? Yes, sir. You know, as you said, we recently, you know, revised the business description. It was deliberate to better describe, you know, how Encore has evolved to serve our customers' needs today and in the future, without sacrificing our continued commitment to exceptional customer service in that effort. As far as our vision, it's consistent with my previous comment on demand drivers. Slide four of our new investor deck lays out some current and future opportunities for our products. We're trying to give a little bit more insight into what are some of the specifics that are driving some of this demand. You know, if you look at commercial, industrial, and residential applications, those continue to adapt, and that's in addition to the traditional uses of our products in those sectors. Looking at smaller scale power generation and distribution investments, on-site renewable energy, battery storage, you know, and electric vehicle charging stations, just to name a few, could require upgrades to the distribution infrastructure to handle the additional load requirements in the future. Our industrial products are designed for a wide range of applications, including oil and gas, petrochemical, battery plants, wastewater, and automotive manufacturing, among others. We'll continue to look at the focus on onshoring manufacturing that could also drive, you know, incremental demand. Those would be my thoughts as you look at it, but that's what we tried to encapsulate both in the new description of the business, as well as the slide deck, particularly slides four, five, six, and seven. Okay. You guys don't typically comment on sort of future demand, but maybe you could speak to sort of what visibility you have, whether that's through your rep, your distributor network. Yeah, in the projects that are sort of in the queue, sort of, you know, to come. Yeah. Brent, this is Daniel. You know, it's really more of the same. The solar projects, data centers, the energy retrofits, and the EV supply chain support, EV initiatives, hardening of the grid, oil and gas, so the energy sectors, are looking good. Then the onshoring, of manufacturing, you know, all the things that Bret just talked about that we're trying to capture in that investor slide deck upgrade, they have to do with the projects that we're involved with on the front end today. It's kind of a continuation or maybe even an expansion, of the projects that we were, you know, already participating in. Okay. Daniel or Bret, maybe could you talk about how you see Encore's positioning sort of value proposition as the economy transitions from fossil fuels to renewable? How do you play into that? Yeah, no, that's also a great question, Brent. With this evolution we're seeing, you know, I go back to that same page on the investor deck. Page four highlights the opportunities that we see for our products in the renewable sector. You know, we talk about our Green Connect products, and they provide power generation and distribution solutions for solar, for electric vehicle charging, battery storage, utility applications. But I would tell you not to just focus on those end market product uses. Our wiring cables are also critical at the front end of the electric vehicle and electrification cycle, such as new battery plants or electric vehicle manufacturing facilities, just to name a few examples. We really do have the opportunity to play across that entire value chain as domestically and globally, but for us domestically, it starts to focus on the electrification, the decarbonization, the hardening of the grid as you look through this, and the overall focus on renewables, you know, and potentially alternative energy sources through solar or smaller scale power gen. Our products are continuing to be focused on serving those needs. As it relates to the, I guess, the passage of the Inflation Reduction Act this year, what demand drivers could we potentially expect to see being driven by that act? Yeah, no, it looks like I think it just recently was passed. I think it was enacted into law, I think in back in mid-November of 2021. If you look at it, you know, it's funding for up to $7.5 billion to help make electric vehicle chargers accessible to all Americans for local and long distance trips. It's embedded in that act. That $7.5 billion is broken into $5 billion dedicated to states to deploy electric vehicle charging network. You've got another $2.5 billion for both corridor and community charging and alternative fuel infrastructure. I think there's a stated goal of about 500,000 electric vehicle chargers. You know, it's continued to be directed at ways in which you can make charging a vehicle much quicker and more efficient, and so we can get a larger adoption of electric vehicles in this country that exceed the current 1% or so you're sitting at. You know, when I look at that, I'm optimistic. I'm optimistic for the opportunities that that could drive continued demand, you know, for our products. Okay, having seen this elsewhere in my coverage universe, I'm curious how much demand's coming from sort of manufacturing onshoring, and is that a trend you think continues or only temporary? Yeah. Great question. This is Daniel again. You know, the onshoring was in progress and, you know, disruption with COVID and supply chain issues really gave it a boost. You know, the demand for our industrial product fits hand in hand with some of the industrial space restraints and constraints around the country. There's new construction that consumes, you know, all of our products on the front end. There's installations of machinery and equipment that will take our product within the structure. You know, there's some pretty attractive areas or markets that you know that we're very attuned and involved with, specifically the Northeast because the population density becomes attractive to some of the manufacturing where there may be a potential company that went offshore that owns property that can retrofit those buildings that typically are not in the new construction data. The Southeast and the Southwest, both Texas and Florida are pretty hot areas for different reasons. Population growth, political reasons, the attractiveness of the packages financially those companies can get to move to Texas and Florida seem to be pretty fantastic and creates a hot market. Then something that gets overlooked quite a bit, I think, is the Midwest, because it's consistently pretty steady. The highs are not quite as high and the lows are not quite as low. With skilled labor and a real steady market, we've seen a lot of requests and a lot of activity in the Midwest market where there's, again, you know, availability of existing structures that can be retrofitted, which takes new product as far as electricity goes, and also for new construction. The onshoring that was in progress really has received a boost post-COVID and with the focus with the supply chain disruptions that have occurred and been documented. Okay. Appreciate that, Daniel. Your aluminum sales increased to 15% of revenue in Q2. They were up over 170% year-on-year. What have been sort of the big growth drivers for aluminum and where do you see the opportunity in the future for that product line? You want that? I got it. You know, we've been discussing and disclosing aluminum volume growth since early 2020, Brent. Now, we've handled this demand growth by scaling our existing aluminum capacity. One of the things as we talked about on the call early in the second quarter when copper prices started to peak close to $5 a pound, we did see a larger number of projects that were being designed on the front end towards aluminum. If you also look at kind of the utility projects that were out there that included upgrades or hardening or expansions of the grid, that consumed a lot of the domestic aluminum wire capacity while these facilities were also struggling to keep up with labor and material and productivity challenges. You couple that with some of the challenges of getting product out of Asia through the ports into the U.S. from an import perspective, just created an opportunity and environment where a domestic aluminum producer like Encore, who's concentrated in the commercial, residential, and renewables market, to leverage our available production capacity to meet this demand. I will tell you from a raw material perspective, aluminum remained strained through the second quarter, like a lot of other raw materials. With this increased demand, I think it only further challenges, you know, that raw material supply. We did see an increase in aluminum spreads that we also highlighted for the first time in the second quarter. You all, I think, picked up on that when you were looking at our overall gross margin levels. Okay. Well, that's a good segue to talk about the margin drivers. I'm sure it's on the minds of many on the call. Your gross margins remained very strong in Q2, historically high for six straight quarters. You talked previously about sort of the supply-demand mix, your ability to ship quickly as a differentiator in the market. Have you seen any indication that margins will begin to moderate, and where do you see them sort of eventually settling within this environment today? That's good. That's a tough one to unpack. If you really look at our gross margins, you know, they're a product of many factors. They center around how efficiently we execute on all aspects of a customer's order. You know, efficiently acquiring key raw materials, converting those raw materials to finished goods, maintaining our facilities, securing the key labor needed throughout the process, and then delivering on our commitment of exceptional customer service. I mean, all that goes into what ultimately translates to a margin. You know, our margins, and I've said this before, it's very cliché, but they're really driven one order at a time. You know, if you go back to pre-COVID margin levels, we finished 2019 at about 13% gross margin. During 2020, we really focused on furthering our low-cost model. We improved margins to about 15.2% for 2020. That was done in the middle of a pandemic. I think what's lost a little bit is we also grew EPS, you know, 30% in 2020. This set us up, I think, very well going into 2021 as a level set. Overall, gross margin started to accelerate in March of 2021. It resulted in, you know, a trend of 19% in the first quarter of 2021. It was 37.3% in the second quarter of 2021, 37.8% in the third, 34.2% in the fourth. Overall gross margin in 2021 was 33.5%. Then it continued as you got into the first quarter of 2022, 33.7%, and then went up to 38.3% in the second quarter of 2022. Now, I've previously stated and believe that the copper margins peaked in the second quarter of 2021. We've consistently said that. And that's consistent with the margin trend we just kind of highlighted or went through. I think it also adds perspective to the fact that copper spreads, as we talked about in the second quarter of 2022, they decreased only 4.4%. And that's a decrease of 4.4% compared to the second quarter of 2021, which we said we thought were peak levels. You know, I think that's a decrease I would consider to be fairly gradual over that period of time. You know, going forward, we continue to focus on exceptional execution. That really is the key. One order at a time. Our one campus vertically integrated model, I think, remains a strategic competitive advantage in our minds. Challenges facing the industry, including access to key raw materials, access to skilled labor, they've not meaningfully changed that we can see over the past year, 12- 18 months. You know, through the second quarter, capacity remains strained in our industry as it generally struggled to meet the demand for timely delivery of finished goods. That's a critical piece of this process, a timely delivery. We did reiterate in our second quarter earnings release that we stated that we believe existing market conditions and the current outlook support existing volume levels as well as support gross margin abatement continuing at a gradual pace. You know, every quarter we plan to update with regard to that, as we continue to execute one order at a time. Okay, thanks, Bret. This next question, I think you know, it's caught some attention as of late. Great opportunity to sort of clarify it. You recently published an update to the pricing sheet on your website. Certainly got some questions regarding sort of how this might impact revenue. Can you clarify for us how the pricing sheet should be used and how or if published changes can flow through your top line? Yeah, I'll take that one. This is Daniel again. We post on our website, as the industry does, a list price sheet, which is simply a starting point or reference point when we're quoting material item by item or a list, or cumulatively, the entire sheet is affected by what we call a multiplier. The industry has done it this way for the 33-34 years that I've been involved. Per one of our cofounders that started back in the fifties, it was priced this way back in the fifties as well. I'm not saying it makes a lot of sense to do it this way, but it's what our industry does. We apply a multiplier, which is a discount, to the list sheet that is posted. Over time, as the discounts go deeper from a 1-5 or a 2-5 or a 3-5 multiplier, which is 0.95x itself 3x at 3 fives. If it gets down to 26 fives or 27 fives, typically the author of the price sheet at times will pull those discounts back to a more reasonable 2 or 3 or 4 fives level. When you post the list price sheet, it could appear on face value, if you don't know our industry, to be a lesser or a lower price, when in actuality, depending on the multipliers that are applied, it's a price increase, which is what occurred on the most recent posting that we had. The industry was running somewhere around 32 or 33 fives, which is 0.95 to the 33rd power. Those 5s as discounts or the multiplier was pulled, and it started over at about a 3 or a 4.5 multiplier. Net-net, it was a 6%-7% price increase, even though the list sheet that was posted appeared to be lower. That's how we price our product as it comes in. It's not as complicated as it sounds. It's kind of the language that our industry sales folks will use with distribution. Everything is in 5s and 2.5s. A 5 is 0.95. A 2.5 is 0.975. If you were to use a 1.5 and 2.5 multiplier, you would apply 0.9263. We only go to four decimals. You would multiply that times the list price sheet on any item and get your net price. Those net prices are never published or posted. Those are what are negotiated, at the point of the quote itself. I hope that's not too confusing, but, maybe it's good that it is. Appreciate that, Daniel. Okay. Maybe just in terms of supply chain, on the last call you talked about sort of continued challenges in the supply chain as have others, just impacting the ability to get key sort of raw materials. Can you talk about any insight as to when those may begin to abate, whether you're seeing signs of it, and maybe just your longer term views on the availability of raw material inputs? Obviously copper's big discussion topic there. Yeah, no. You know, as you look at this, and we've talked about this, Brent, I mean, access to key raw materials, right, is one of the things that's directly impacting, you know, the timely delivery of finished goods. That obviously remains strained. Every input that we use from copper cathode to aluminum to plastic compounds, nylon, pallets, cardboard, you know, the freight aspect, diesel, natural gas, you know, everything remains tight. You know, if you look at the burgeoning demand for raw materials globally, I think that further likely strains the existing supply chain. Keep in mind, this is with China largely shut down. As soon as they come out of the COVID lockdowns and aggressively try to catch up on some GDP promises, you know, that's gonna cause us further strain. It probably gets some of the fundamentals back into the pricing of copper given the tightness. You know, there's only three days of copper above ground at the moment. Like that's tight. That's down from probably, you know, eight to 10 days from pre-COVID levels, you know, going into the several years leading up to COVID. So it's a trend that we've seen since even before the pandemic. You know, if you look at near and midterm greenfield or brownfield copper mine projects either coming online or being upgraded, it's just not that significant of an impact to the overall supply going forward. It also probably takes about 10- 12 years if you and I decided today to open a new mining site. And so there's a long, long lead time to be able to get into something that becomes productive. That's really where the decade-long relationships with suppliers become so valuable and vital. You know? You've got to have someone you can rely on that can get you know, and continue to serve your needs and grow with you as you grow. We've been very fortunate with our key suppliers that are predominantly domestic. Again, I think that's been a differentiator for us in the supply chain challenge. They continue to be exceptional at what they do. Domestically, the onshoring of manufacturing, decarbonization of the economy, the subsequent modernization of the electric infrastructure that's on the table all point to significant increases in future raw material demand. You know, I think if it's just for the U.S., I think, as I said, the demand further strains the supply chain. You know, I'm bullish on prices on a go-forward basis, and I think the supply chain's gonna continue to be strained. It's hasn't meaningfully changed over the last 18 months. Okay. Thanks, Bret. You guys have taken an advantage of this sort of influx of cash in the last 6+ quarters. You spent $118 million in CapEx in 2021. You've got another $400 million in spending through 2024. How do you guys approach what CapEx projects get funding? Can you talk about the planned projects through 2024 and how, you know, we as investors can think about the ROI on those investments? Yes, sir. You know, all the CapEx spending is focused on several key initiatives, key objectives, if you will, either improving our service model, taking costs out of the system or both, right? That's the line we always base everything on. You know, you're looking to remove touch points to reduce costs. Also, some of the labor requirements, increase vertical integration, decrease exposure to some of the risks that were identified in the supply chain, you know, specifically through the pandemic, increase capacity and automation, speed up order to ship. We always are targeting our 100% order fill rates and quick shipments. You know, our CapEx in 2022 through 2024, as we said, is really focused on expanding vertical integration in our manufacturing processes to reduce costs, as well as modernize select wire manufacturing facilities to increase capacity and efficiency and improve our position as a sustainable and environmentally responsible company in the industry. You all have seen this. We do remain vague for competitive purposes. I've said that before. It does make answering the ROI question, you know, even more difficult. You know, the ROI on an investment to deepen vertical integration is gonna differ from the ROI on an investment that expands and/or further automates a manufacturing facility. I would say, let's look at the service center expansion as a proxy, maybe for discussion purposes. When we announced the construction, and keep in mind, we announced that in February of 2020, pre-pandemic. Everyone came to us and said, "Will we stop them? Will we halt them? We hold them back?" We kept going full speed ahead, set up a tent outside, took temperatures and gave out wristbands, and we were outside, right? We moved ahead. We opened that facility on time and on budget in May of 2021, and we really saw an opportunity to improve our inventory control, customization of orders, the turnover, how many touch points we had with regard to it, and also helped us continue to maintain that service prop of fast and complete order deliveries coast to coast. You know, when you look at the emergence of COVID, the challenge that has, it has followed, I think these opportunities have become even more appealing. Today, you know, order lead times in our industry have been challenged, right? The ability to quickly ship or complete orders is, and has remained, a vital differentiator, and you're seeing that in the margin. You know, so when I think about the return on investment from the service center, we believe that we have really seen it reflected in our top and bottom line since the service center began operations in mid Q2 of 2021. Volumes and margins have increased. We continue to meet our value prop to the market, where, you know, generally there's been struggles in the industry. Current CapEx initiatives address upgrading the manufacturing facilities to remove costs, increase growth integration, increase automation, increase capacity. I will provide, you know, some additional details on the key projects one by one as we get a bit closer to completion. You know, that's been our focus as to how we evaluate those investments before we make them. Understood. Okay. Another question that's come across a lot is the sort of visibility you have until, you know, additional manufacturing capacity being added by your peers, your competitors, to meet the higher demand in the industry. Any commentary there? Yeah. I'll take that one. This is Daniel again. You know, we don't have publicly traded competitors anymore. We used to. When I first started in the industry, we had 30-some odd competitors. We're down to, you know, maybe six or seven in the markets that we serve today on a consistent basis. For the most part, best we can gather, all of the manufacturers we compete with are running all of their manufacturing locations. Most of our competitors have more than one location. They're all running. They're shipping, they're doing the things that they do. There's some machinery that's being swapped out with a few competitors. There's a few orders that we've seen, or heard about, you know, through third parties. As far as purchases, nothing has been significant. There's some raw material productivity changes. You know, our largest Southwire is our largest competitor in Carrollton, Georgia, and they've been pretty public about building a new copper rod production facility. As far as building wire capacity in the markets that we serve, we're not aware of any large or huge projects to address capacity issues at this time. Everybody's running. There's constant upgrades to equipment and you know, as equipment gets old and you swap it out for various reasons, what have you. Don't know of any real large-scale capacity increases at any of the competitors. Okay. Interesting, Daniel. You guys generated almost $490 million in free cash flow over the last 12 months. At least we are modeling a cash balance of call it $660 million at the end of this year. What are your other sort of long-term plans for the cash, you know, given the CapEx plans you just talked about? Yeah. You know, as you've seen, free cash flows remain very strong, you know, over the past five to six quarters. It further strengthened our already very, very strong balance sheet. You know, given today's buy-in and raw material requirements, just to kind of baseline it, I believe we'd need to keep roughly $200 million of cash on the balance sheet for working capital needs. You know, it's on the fringes where you're gonna need cash, $2 copper, $8 copper, right, is where you're gonna really draw on your cash balances. As I said before, we continue to have three primary uses of cash. You've got capital expenditures, you've got share buybacks, and you've got a dividend. You know, we've grown organically from day one. We've never done an acquisition. We've got 460 acres, and we sit on 225 acres of them. We've got a lot of room for growth right here on this vertically integrated campus. We just discussed CapEx levels. I'd tell you we're likely capped out for the next three years with the current initiatives that we have. We did repurchase 1.1 million shares year to date in 2022 for approximately $132 million. Since February of 2020 through the second quarter of 2022, we've repurchased just over 2 million shares for a total cash outlay of $196 million. I would tell you in some new news or current news, the board, as you know, had previously authorized the repurchase of up to 2 million shares through March 31st, 2023. We have repurchased, as I said, 1.1 million year to date on that authorization. The board has reloaded that authorization back up to 2 million shares through March 31st, 2023. We continue to see this as a good use of cash. We do discuss the highest and best use of company resources with the board every time we meet, and we're gonna continue to evaluate those options on a go-forward basis. Okay, great. Maybe just one more from me before we turn it to the audience. You know, I guess, what are the challenges you see the industry facing in this environment, just from a manufacturing product supply, access to skilled labor, logistics standpoint? Sort of how do you feel like the company's positioned to adapt to these challenges? I'll take it and then Daniel will jump in. You know, when I think about the challenges in our industry and the adaptation that's going on, I think we're very fortunate to operate as a one-campus vertically integrated business model as we do to talk about why we think that's been offering us a strategic competitive advantage. You know, as we've talked about through the second quarter, the industry generally has struggled with the timely delivery of finished goods, and it's for a variety of reasons. You know, demand was strong through the second quarter of 2022. The overall supply chain remains strained, as we've talked about. Access to skilled labor is only marginally better, but the cost of that labor continues to increase, right? We've got public health, cultural compensation environment that's changed very, very quickly over the last six to nine months. Attracting and retaining talent, it's becoming more time consuming, it's becoming more expensive. You know, overall compensation structures are changing. You know, having a corporate culture that fosters a positive work environment really is paramount, and it can be a differentiator, investing in employees. These challenges are difficult to navigate on a single campus model, right? Think about navigating those same challenges. It's a daunting task at an enterprise level for a company with, you know, multiple manufacturing facilities, 10, 20, 30. You know, distribution warehouses, 10 or five or 10 or eight or 12 distribution facilities across the country and multiple corporate facilities. You move to the supply chain, suppliers, you know, who make plastic compounds or heavy machinery or copper rod, they have the same labor issues, right? It all flows up all the way to the mine, you know. Lead times to order, you know, the machinery and equipment has significantly increased from pre-COVID levels. You know, it's 12, 18, 24 months lead time for critical machinery and equipment. Primarily it's coming from Europe, Germany, Italy, right? Then you have to add in, you gotta get it here. A lot of times it comes across only as a mechanical. You have to find the drive, the electrical or the motors domestically, right, to finish the machinery here on site, or at least here in the U.S. Then you get it sent over to the facility. You got three months probably for installation and commissioning. This is even before we know the impact in Europe of the natural gas challenges going into the winter months. That's gonna further strain it. You know, product demand has remained strong. The premium for value-added raw materials like copper rod is challenged, and its scarcity continues, as more seems to be coming offline domestically. It puts pressure on smaller competitors who can't make their own copper rod, right? That's why the copper rod mill is a competitive advantage. Adding capacity to the system from a product standpoint is only more challenging, not only on the machinery, but having the raw materials to feed it. We've talked a lot about the long-term raw material outlook, numerous challenges and increasing the availability of finished goods with those constraints. You talk about this long-term potential demand drivers, right? The focus on renewable, electrification, decarbonization, all drive future demand in this strained raw material environment. You try to talk about incremental demand and then new capacity. It just further strains an already stressed market, as we see it. Long-term relationships with your suppliers, as we talked about, are critical. I think as you look at this, until there's some systematic changes that'll alleviate some of these pressures, we still believe that we retain some distinct competitive advantages. Talk about our verticals, our copper rod mill, our plastic mill. CapEx initiatives are increasing those verticals. Costs are being removed from the system. The one-campus model gives us a lot of flexibility. We can pivot. Speed to market is paramount. Everything's now going through our service center. We got world-class inventory control, allows us to customize individual orders quickly, simplifies logistics. That's helping in our lead times, allowing quick shipments of 100% complete orders. Labor, our workforce is highly skilled. It's highly trained. It's local, right? We can take folks, and we can move them around campus as needed to fill voids, if we have any sort of labor shortages. The corporate culture comes from the top. Daniel's employee number three, right? He's run machines, swept floors, loaded trucks, run sales, right? He understands all aspects of this business, and I think that makes us better. It makes us faster, right? It makes the decision process that much quicker. We're not waiting for issues to bubble up. He and I are on the plant floor every single day, right? Fixing things before they become big problems. I think all of that just allows us the speed. It gets us to market quicker. Daniel said it before, speed is what fast beats slow, and I think that's serving us well today, and I think that's a differentiator in the future. Daniel? Yeah. Thanks, Bret. You know, we committed to, a while back, the process of improving and attracting the talent that we need from the area. We retrofitted an existing building to a state-of-the-art employee center. It houses our support for the hiring. It houses our on-site medical clinic for the employees and their families to use and utilize. We do our pre-employment testing on-site in that employee center. We have a chaplain service that we use through the employee center. We're able to provide hands-on training in the back of the employee center. You know, and continuing to try to do what we can do to not only attract fantastic talent as we grow, but provide some services for retention of the employees that we have. They appreciate that investment. They can see that investment. It's already paying dividends. The quality of the candidates that we're getting today versus six or eight months ago is drastically improved. A lot fewer drug test failures and some of the other data points we could share. You know, as it pertains to the raw material situation that Bret was discussing, all of our vendors and customers and end users are experiencing some type of an issue within their own industries. There's almost an expectation of paying a premium for service and not only on-time delivery, but complete orders being delivered on time. You know, you could take the residential market, and if you do enough research or conversation, you'll find that there's delays in different aspects. The good thing, though, about our piece of that puzzle, if you order the product from Encore, you're gonna get it all and you're gonna get it on time. It's a way for our execution really to be maximized from a profitability standpoint, where we can charge that slight premium to have that type of service and help to possibly relieve the stress or take one item off of somebody's list of things to do when the wire shows up correctly and on time. You know, we've maximized the campus here with our rail site. We have several miles of railroad track where we can bring product in, and it gives us the flexibility on the raw material side, you know, to maybe accommodate, and to help smooth some of the highs and lows from our vendors on the raw material piece. Anything that we can think of that's going to lower our costs or increase our service model, we're all in. I think that's the story, and you can see it, when it starts with the employees at that employee center that, you know, that we finished up, a few months back. A lot of things happening that are fantastic. A lot of things happening that are good. If we see something that we can improve on or lower the cost or increase that service model, it's all hands on deck, and we get it done. Jenny, Brent, we could probably go ahead and open this. If you don't have anything else, Bret, we could open this up to Q&A. That sounds great. Thank you. If you have a question, please press zero one on your touch-tone phone. If you wish to be removed from the queue, please press zero two. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero one on your touch-tone phone. That's zero one for questions. Looks like we covered everything, Jenny. Anything in the queue? Oh, we have one now from Ingrid Kaplan. Please go ahead. Ingrid, your line is open. Please check if you're on mute. Hey, sorry. Can you hear me? Yes. Yeah, just appreciate the time today, guys. It's been really helpful. Maybe just a quick question on, you know, the supply chain. You know, I think that's been a, obviously a huge place of differentiation for you guys. I guess, you know, do you expect any material changes to happen over the next, you know, six, 12 months on the supply chain front? As you noted that, you know, no one was building any big projects, which makes sense. But I guess, you know, how quickly. You know, just trying to understand, like, how quickly the environment could change here, you know. Or do you see this as kind of a very, you know, slow-moving kind of situation where the current conditions just persist for much longer than anticipated? Thank you. Yeah, that's a good question. We talked about what's really challenging the supply chain. Let's start at the metal, as we talked about, right. You know, China consumes about 50% of the world's copper, right? They've been largely turned off as you go through this, and that's caused some disconnect in just the fundamentals from a price perspective. The price of copper today is not reflective of three days above ground and how tight it is, right? I think you're gonna see some alignment coming from that, particularly as China starts to come back online. As people add capacity, demand only increases, right? The shape of the metal is extremely important, right? You can't wire a building with copper cathode. You can't wire a building with copper rod. You've got to get the rod to be able to draw it down and make building wire. You know, that is strained. Some more rod capacity domestically continues to seem to come offline. That's gonna strain an already strained market. Aluminum's not much better. It's tight as well. Lends itself a little bit more to imports, but aluminum remains tight as well, as you're seeing in our volume growth. You know, all the other raw materials change prices, right? I don't think it meaningfully changed in the discussions I have since the start in middle of the pandemic. One or two get better, one or two get worse. You know, I do think globally we're gonna have challenges as we go into the winter months in Europe and the natural gas supply and some of those effects I think are gonna trickle down. We've had a very calm hurricane season despite the predictions. Typically, you know, when you have a lot of hurricanes typically heading towards the Gulf Coast, you can see spikes or disconnects in certain raw material availability, delivery because of it. We've been fortunate not to have any of those as of yet. That's always out there. Long answer to say not a lot of meaningful changes in from what I can see from our supply chain, and it's hard to see where a lot of things meaningfully change in the near term. Got it. Super helpful. Just I guess with that, does that mean we should kind of expect spreads more, I mean, robust, I guess, in the near term going forward? What was the question? Spreads. Oh, the spreads. Well, as I say, you know, we go back to what we stated in the earnings release. You know, based on our current outlook, we think it supports existing volume levels and the continued abatement of gross margin at a gradual rate. We'll continue to update that every quarter. Great. Thank you. Jenny, any other questions? Yes, we do. We have Christian Herker. Please go ahead. Yes, hello, and thank you for taking the question. Forgive me if this is a naive one, but you talked about a near trebling of your gross margin over the past two years. Am I right in thinking that that includes metal price effects? If so, perhaps can you elaborate on what you saw in terms of margin development at sort of standard metal pricing, and then maybe touch on the ranking of the other drivers that have supported the change in margin over the past two years? Thank you. Yeah, it's a good question. Really in all aspects, right? As we talked about, you can't wire a building with copper cathode or copper rod. We don't sell copper. We sell building wire. Right? Same thing with aluminum. Every aspect of that order and the requirements to acquire, convert raw material to a finished good and get it delivered was strained as you went through this process. A lot of uncertainty. Raw material costs, not only the metal but in this case, the non-metal PVC, resin, diesel, plasticizer, clay. Right? Pallets. Wood for pallets, wood for reels, right? You know, specific insulation that you utilize for a photovoltaic or solar application. Labor costs or even access to that labor. Everything was more expensive. That then depended on your ability to actually get a truck to pick it up and get it delivered. All those uncertainties are really what drove up the prices over this period. We continue to leverage our one cost, our one campus model and our deep relationships, and we were able to you know continue to serve our customers through the pandemic. To the extent our delivery commitment or our goal of getting it shipped in one to two days slid, and maybe it was taking us three, four, five, six, eight days to get an order shipped, it was still vastly better than what the broader sector was delivering on. That differentiator allowed us to see the margin growth that we experienced over the period. Understood. Thank you. We have no further questions at this time. Jenny, thank you so much. Brent, I really appreciate you taking the time today. Some great questions that you had offered up. I really wanna thank all of our investors and shareholders for your confidence and continued investment in Encore. You all enjoy the day. Bye-bye. Thank you, guys. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.