Company Update
March 2024 | Company Update
Entering 2024 we expected a more challenging year due to customer order delays, lower bookings (new orders) in several markets, higher interest rates, and the upcoming presidential election. As we approach the end of the 1st quarter and our 50th anniversary in June, those expectations have become reality. Despite solid overall bookings totals for January and February, we have not achieved our targets in most markets, primarily due to the factors we expected.
Summary of Current Status:
- We are coming off a very successful 2023 and have a strong overall backlog (work remaining on open contracts) of $43mm. This backlog provides > 6 months of work overall but select areas of our business will likely see some slowdown until we secure new orders in these markets.
- Our YTD bookings are only above projections in 3 of our 11 markets (Paper, Nuclear, and Genesis). Our primary focus is always to ensure decisions we make today, such as wages, overtime, and capital expenditures, balance both job stability and future growth. Over the past 50 years, our conservative approach and diverse business model have been key factors to overcome challenging years such as 2001 (9/11), 2008 (financial crisis), and 2020 (COVID pandemic).
Impact on Wages & Bonuses
- Until we achieve our YTD bookings targets in the majority of our markets (6 of 11), we will continue to defer company-wide wage increases and revisit monthly; however, we will proceed with select increases effective 3/25 for those who have assumed new roles or responsibilities. Your manager will meet with you before the end of the month if you will be receiving a wage change. Our goal remains to implement broader wage increases as soon as possible and achieve the required profitability targets to pay year-end bonuses. Wage increase decisions are based on what we are planning to do (bookings/backlog), whereas bonuses are paid based upon what we have done each year (sales/profit).
Actions Being Taken
- We have been increasing our proactive sales & marketing efforts to secure bookings in all markets. This means more client calls, visits, trade shows, along with thorough cost estimates and creative supplier sourcing. We have also increased our field service/ parts teams at Beta Star, Ackley, and Hartnett to continue expanding this business. We have some good capital project opportunities and hope to secure them in March and April.
- Overtime will be actively managed to align with backlog/demand in all areas. You may need to be flexible within departments or locations for overtime.
- Shift project work and team members across various locations and departments to support demand fluctuations.
- Limit new hiring to align with current capacity demands.
A tougher environment in 2024 provides a challenge to improve in all areas and outperform our competition by adding value to our current and prospective customers. We have added some great products and people over the past few years which will help us overcome these short-term issues. Our decisions remain guided by our mission to improve each of your lives while ensuring the sustained long-term health of the business. To borrow a hockey analogy from Wayne Gretzky, we want to skate to where the puck is going, not where it has been.
Key Performance Indicators
- YTD Sales vs. Projection: $15mm (At projection through February)
- YTD Gross Profit vs. Projection: 1% Below Projection through February
- YTD Bookings: $18mm ($15mm YTD Target of $7.5mm/month)
- Backlog: Lower than prior year in 8 of 11 market areas
Our YTD bookings highlights include multi-million-dollar projects in Paper (dryer section for Atlas Roofing, Mississippi) and Nuclear (CCO waste containers) along with a new Genesis machine project for Zoetis. Thank you to our sales/estimating teams who have found a way to meet our monthly bookings targets when things looked bleak late in both months. We will need broader contributions from all markets to reach our target in March and help fill capacity gaps going into the Summer.
Thank you to all departments for helping us find ways to succeed in a more challenging economy. Control what you can control – attitude, effort, communication, teamwork, safety, 1st pass quality, hours performance – and we will continue to be successful.
Please let me know if you have questions, feedback, or want a better understanding of any terminology or topics addressed in this letter. We will continue to provide regular updates, so you are informed about the status of wage increases and bonuses.
Kirk
KirkP@rvii.com | 484.532.6030 (phone/text)
