Greetings, and welcome to the Valmont Industries Q2, 2023 Earnings Conference Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Renee Campbell, Senior Vice President, Investor Relations and Treasurer. Ms. Campbell, you may begin.

Thank you, and good morning. Welcome to Valmont Industries Second Quarter 2023 Earnings Call. With me today are Avner Applbaum, President and Chief Executive Officer; Tim Francis, Interim Chief Financial Officer; and Eugene Padgett, Senior Vice President and Chief Accounting Officer. This morning, Avner will provide a brief summary of our second quarter results, commenting on our markets and long-term business strategy. Following that, Tim will review our financial performance and provide our current outlook and indications for 2023 with closing remarks from Avner. This will be followed by Q&A. A live webcast of the presentation will accompany today's call and is available for download from the webcast or on the investors site at valmont.com. A replay will be available on our website later this morning. Please note that this call is subject to our disclosure on forward-looking statements, which applies to today's discussion is outlined on Slide 2 of the presentation and will be read in full at the end of today's call. Finally, if you would like to be notified when Valmont publishes news releases and other information, please sign up for e-mail alerts through our investors site. We also encourage investors and others interested in our company to follow Valmont and our brands on the social media channels listed on our website. With that, I would now like to turn the call over to our President and Chief Executive Officer, Avner Applbaum.

Thank you, Renee. Good morning, everyone, and thank you for joining us. Before discussing the results of the quarter and current market dynamics, I would like to spend a few minutes on my recent CEO appointment. First, I'm extremely humbled and honored to be addressing you today as the CEO of Valmont. This is a great company that delivers products and solutions our customers need to solve their most pressing challenges. Our global team is dedicated to our purpose and united by our core values to achieve our goals. The people at Valmont are one of the primary reasons I joined the company in 2020, and I could not be more proud to be part of this outstanding team. Having worked closely with the entire leadership team to develop and implement our strategy over the past 3-plus years, I understand what is required of this role. The executive team and Board of Directors are aligned around our long-term strategy to accelerate our journey towards becoming a leading industrial technology company. This strategic framework, which I will discuss in a few minutes is the right approach to continuing the momentum we have built and provides a clear path to achieving our long-term financial targets. As CFO, I led the transformation of the finance organization using data, advanced technology and processes to drive better business decisions and value. This focus has led to a more disciplined approach across the organization in using data and analytics to achieve our financial goals with an emphasis on ROIC. As CEO, I look forward to leading Valmont along the strategic path we have been on over the past several years, driving strong financial performance for the company and our shareholders, while remaining committed to our sustainability journey. Finally, I want to thank Tim Francis for stepping into the role of interim CFO. I am confident in his ability to lead our finance organization and contribute to the executive leadership team until we are prepared to name a permanent CFO. Turning to Slide 5 for a review of second quarter financials and key messages. Our results in this quarter were strong, achieving an adjusted operating margin of 13.2%. Adjusted diluted earnings per share grew to a record $4.37, building on the momentum from 2022 in the first quarter of this year. I am very pleased with our growth and profitability and proud of the entire Valmont team to what we have accomplished. Infrastructure demand globally remains robust, benefiting from several secular long-term growth drivers, including the global energy transition and ongoing investments in grid hardening. We are seeing strong demand across nearly all our markets. Global agriculture market fundamentals are being influenced by uncertainty in North America as farmer sentiment is muted pending the outcome of this year's harvest, which I will expand on shortly. We continue to be excited about the long-term growth potential of agriculture and our ability to transform the industry with disruptive technology that improves land productivity and enables growers to do more with less. In both segments, our discipline and strategic pricing has ensured we are capturing the value we add to our customers, which has driven margin expansion amid lower sales and ongoing inflation. Wrapping up our key messages. We are executing our run, growth, transform strategic framework that we outlined at our recent Investor Day. Earlier this month, we announced an agreement to acquire HR Products, a strategic bolt-on that expands our irrigation aftermarket part capabilities and drives international expansion. This is an excellent example of harnessing our strong balance sheet to further our strategic initiatives. Moving to Slide 6 for an update on current market conditions, starting with infrastructure and utility markets. Utilities have increased their CapEx spending to support grid hardening initiatives and in an evolving electricity generation portfolio. Transmission demand is outpacing market capacity as indicated by industry lead times that exceed 40 weeks. We are strategically adding capacity to meet the strong multiyear demand. In lighting and transportation, transportation market demand is being supported by increasing investments in road construction and we continue to see some increased coding activity related to IIA funding. Commercial street lighting product demand globally is muted due to impacts of inflation, and higher interest rates leading to softness in single-family housing and commercial construction markets. In telecom markets, we are seeing CapEx spending by wireless carriers more aligned with historical trends following record level of investment. At the onset of 5G, the industry predicted this rollout to be more rapid than previous generations. In reality, the buildout timing is proving to be similar to past experiences. As pauses in CapEx spending are common during network expansions. Major carriers will continue to invest in wireless networks to meet nationwide coverage and capacity commitments after having spent over $120 billion on 5G spectrum. Our wireless communication structures and components business remains well positioned to meet this demand. Our Coatings business tracks industrial production levels and has seen near-term strength from utility and transportation markets. Turning to solar. Domestic guidelines related to the Inflation Reduction Act have been released. Even though the industry is awaiting clarity on the manufacturing tax credit details, IRA support is expected to provide strong market tailwinds for the next several years. Globally, renewable energy investments in markets such as Italy and Brazil are supporting demand in those regions. Valmont has a competitive advantage in the distributed generation solar market, and we prioritized that niche market due to its attractive growth rates and accretive quality of earnings. Turning to agriculture. Starting with North America, demand this quarter was less robust than we and the industry originally anticipated. While U.S. net farm income is projected to decline year-over-year, it will still represent the third highest income level over the past 10 years. Additionally, recent USDA data suggests improving drought conditions for much-needed rain across key growing regions. However, many areas of the country remain at severe or extreme drought levels. We view these market tailwinds as positive, but growers have maintained a wait-and-see approach in purchasing decisions. This is supported by recent Purdue University reports, which highlight farmer uncertainties around higher interest rates and volatile commodity prices. We believe these uncertainties may continue to weigh on sentiment through this year's growing season and expect the outcome of this year's harvest to provide more clarity on order patterns for the remainder of the year. Moving to international markets, we continue to see strength in Brazil, supported by the financing program that was announced in late June. The Brazilian government demonstrated strong support of agriculture markets with an increase in irrigation funding of nearly 25% over last year, with approximately BRL 2.4 billion available to growers. The terms of these loans are extremely favorable, making this program an attractive option to support continued irrigation investment. In other international markets, our project pipeline remains robust, not only driven by ongoing food security concerns but also the ability to produce goods for export, which can help reduce trade imbalances and currency fluctuations. In more developed regions, the demand for increased resource conservation to further enhance productivity has been a demand catalyst for our products and technology solutions. Project sales in the EMEA region this quarter were lower compared to last year. We expected shipments of the previously announced $85 million Egypt project to begin in the second quarter. However, there was a slight delay, and the project began shipping this month. We anticipate shipments will continue into 2024. We have intentionally and strategically built exposure to diverse infrastructure end markets and a growing pipeline of international agriculture projects, which helps us to better manage softness in any one end market across the portfolio, delivering more consistent financial results. I am pleased with our second quarter performance and proud of our entire team's achievement. Moving to Slide 7. In May, many of you joined us either virtually or in person at the New York Stock Exchange for our Investor Day. I would like to take a few minutes to elaborate on our new run, grow, transform strategic framework I mentioned earlier. This framework will move us forward as we evolve into a higher quality and more dynamic organization, delivering shareholder value that is less dependent on the cycle of any one end market. It guides our allocation, our resources, capital, time, and effort. Our framework begins with the run, which is the idea that we are built for sustainable outperformance. This solid foundation allows us to operate well, confirmed by a proven ability to deliver results and drive profitable growth even when economic cycles are volatile and uncertain. Our commitment to operational excellence, developing business models, and the continuous improvement mindset are critical to maintaining the run. With an established run foundation, we can drive growth across our businesses that exceed expected market growth rates. This can be achieved through geographic expansion, such as our robust pipeline of international irrigation projects or through optimizing our best-in-class distribution channels by creating additional touch points to serve our global customer base. When we speak to transform, it's making sure that we are being great stewards of the company long-term. It is a mindset where we look to be a disruptor in our markets. We operate in capital good markets where high barriers to entry or economy, leveraging our industry-leading position, including extensive distribution networks, and trusted reputation, we bring innovative technologies to our customers and are focused on creating more stable and high-value revenue through recurring revenue streams while delivering proven ROI to our customers. Earlier this month, we demonstrated our commitment to making investments that align with our growth strategy with the announcement to acquire HR Products summarized on Slide 8. This Australian-based wholesale supplier of irrigation products provides geographic footprint expansion in this key agriculture market while enabling us to better serve our customers through expanded irrigation parts offerings. With our large installed machine base in the region, we have a path to grow recurring, stable, high-value revenue streams, perfectly aligned with our growing transformation objectives. We expect the transaction to close in the third quarter and look forward to this great business joining our portfolio. With that, I will now turn the call over to Tim for our second quarter financial review and updated outlook.

Thank you, Avner, and good morning, everyone. Before I begin, I would like to express my appreciation and excitement to be working with Avner and the rest of the Valmont team. By way of background, I have been with Valmont for over 9 years. First as the Senior Vice President and Corporate Controller; and most recently as the Finance Business Partner Global Operations. During that time, I worked closely with all of our lines of business, segment leadership and our Audit Committee. We have an excellent global finance team, and I'm honored to serve in this role during this transition period. Turning to Slide 10 and the second quarter results. My comments will focus on the adjusted results as outlined in the press release and in the Reg G disclosure in the presentation appendix. Second quarter net sales of $1 billion decreased 7.9% as sales growth in infrastructure was more than offset by lower agriculture sales. Accounting for the 2022 divestiture of the Offshore One business reported in the other segments, sales decreased 5.7% year-over-year. Despite lower sales, operating income grew 12% to $137.6 million, with operating margin increasing to 13.2% and surpassing our previous long-term goal of 12% and on the path to our new long-term target of 14%. Operating margin improvement reflects continued benefits from value-based pricing, cost optimization, and operational efficiencies in both segments. Diluted earnings per share grew 18.1% to a record $4.37. Turning to the segments on Slide 11. Infrastructure sales of $770.6 million grew 4.2% year-over-year due to favorable pricing globally, higher volumes in the solar and TD&S product lines, and sales from the conceal fab acquisition, partially offset by lower volumes in telecommunications. Operating income increased to $116 million resulting in a strong operating margin of 15.1% of net sales, with actions taken to improve the cost of goods sold and a favorable sales mix driving the margin improvement. Moving to Slide 12. Agriculture sales of $279.9 million decreased 25.9% year-over-year. The benefit of higher average selling prices of the irrigation equipment globally was more than offset by lower volumes. In North America, sales were lower as the second quarter of 2022 benefited from the ongoing delivery of record year-end backlog and growers delayed capital investment decisions in the spring of 2023. International sales were lower as sales growth in Brazil was more than offset by project delays in the EMEA region. The lower volume of irrigation equipment affected sales of agriculture technology products and services, leading to a decline year-over-year. Operating income decreased to $53.2 million or 19.1% of net sales. Higher average selling prices and focused activities to improve the cost of goods sold drove operating margin expansion despite lower sales. Turning to the cash flows on Slide 13. Second quarter operating cash flows of $88.3 million were driven by strong earnings and diligent working capital management. Turning to Slide 14. For a summary of second quarter capital deployment, CapEx was $23 million as we continue to invest in strategic capacity expansions. Through our balanced capital deployment framework, we are focused on enhancing shareholder value. In the second quarter, we returned approximately $37 million to shareholders through dividends and share repurchases, ending the quarter with $167 million in cash. Moving to Slide 15. Total debt to adjusted EBITDA of 1.6x is within our desired range of 1.5 to 2.5x. Our cash balance, available credit, and flexible balance sheet provide us with ample liquidity to execute our capital allocation strategy. I would now like to review our updated 2023 outlook, as shown on Slide 16. Given our second quarter results and continued near-term softness in North America agriculture, and telecommunication markets, we now expect sales growth of 0% to 2%. We expect improved year-over-year operating margin in 2023, given our pricing strategies, strength in certain markets, and our ongoing continuous improvement initiatives. Strong second quarter results, combined with an improved operating margin support maintaining the full-year earnings per share range while updating the sales outlook. Turning to the segments, continued strength across infrastructure markets supports our expectation for higher sales this year. We expect telecommunications sales to be lower, more than offset by higher sales across the rest of the segment portfolio. The spike in steel costs during the first four months of the year is expected to slightly reduce our infrastructure operating income margin for the second half of the year compared to the strong second quarter results. Turning to agriculture, we expect North America sales to be modestly lower in the second half of the year as compared to the first half. Our assumption is that growers continue to delay capital investment decisions until they have more clarity on their crop yields and overall commodity prices. A reminder that the third quarter is typically a lower North America sales quarter compared to the rest of the year. However, we expect much stronger international sales led by higher project sales and sales growth in Brazil to more than offset the North America seasonality impact. A higher mix of international projects will reduce agriculture segment profitability in the third quarter compared to last year. To summarize, our expectation for diluted earnings per share growth has not changed. We are confident in our outlook and believe that it demonstrates the strength of our portfolio, favorable trends across most of our end markets and our strong competitive position in the marketplace. We are leveraging our global scale to improve margins and drive strong cash generation, enabling us to support our growth strategies and achieve our long-term financial targets, driving sustainable shareholder value.

Thank you, Tim. Continuing my comments on Slide 17. We have built on the competitive advantages that uniquely position us to win in infrastructure and agriculture. We have a flexible and broad global footprint that allows us to efficiently manufacture products that our customers need while optimizing our supply chain to avoid unnecessary disruptions. And our breadth of product offering, which is always expanding, enables us to solve the various challenges our customers face. Together, these factors contribute to making Valmont the trusted partner of choice. Not only do we have strong competitive advantages, but we are also in great markets with multiyear demand drivers. Infrastructure and agriculture both have megatrends that will extend well into the future. We are in a great position to proactively capitalize on these trends and exceed market growth expectations. Turning to Slide 18. As announced during our Investor Day, we established new 5-year financial targets based on a positive end market outlook and our ability to execute on the run growth transform framework. Today, we remain committed to achieving these financial goals. In summary, I'm extremely proud of our team's ability to execute our strategy and drive strong results while navigating near-term softness in some markets. While recognizing broad macroeconomic challenges, we are encouraged by ongoing demand strength across our end markets and remain focused on the things we can control. I'm confident that we are positioned for success, and we continue to accelerate growth through investments in innovation and technology with a focus on disciplined capital allocation. We have acted decisively to position our business for growth, building momentum to drive long-term stakeholder value through the second half of 2023 and beyond. I will now turn the call back over to Renee.

Thank you, Avner. At this time, the operator will open up the call for questions.

Our first question comes from Brian Drab with William Blair.

The first question is a minor one, I think. But on Slide 16, is this a cut and paste error with the EPS guidance that says the high end. I think there's no change to the guidance, right, for EPS? That's correct.

No change to the guidance.

Okay. So that's just an error on the slide, right?

Yes, it must be.

Yes. Okay. So the gross margin, I feel like it should be discussed a little more, just given it was about like 400 basis points above what the Street was expecting. I know a lot of that is pricing coming through and other actions that you're taking. But can you talk about why we were above 31% in gross margin? And how sustainable is that going into the back half of the year?

Brian, this is Tim, and I'll take that question. First off, we are very pleased with the third quarter margins. It was a result of the actions taken by our teams for value-based pricing and operational excellence activities. Over the long term, these activities will drive an improvement to our average historical gross profit margins. Some of these activities were professionalizing our sourcing group which has been really focused on leveraging the size and spend of consolidated Valmont as well as operational efficiencies, starting with the activities on our supply chain such as getting those cost benefits we expect from our automation investments as well as better labor and overhead management. With that said, we do not expect to sustain a 30% gross profit margin in the second half of the year, and it's really for two primary reasons. One, as we talked about in our prepared remarks, we're going to see a sales mix more towards international projects in the agriculture segment, that is typically at a lower profitability profile to the overall segment. And then secondarily, in the first four months of the year, we saw a meaningful increase in the cost of steel, specifically hot-rolled coil. With the timing lag, meaning how that cost of steel goes through our income statement, our average cost of steel will be higher during the second half of the year than what we saw in the second quarter.

And Brian, this is Avner. I'll just add to that. We're really pleased with what's happening with our gross profit. The improvement in Q1 on Q2, it's never going to be a linear line up but we are on the track to 12%, really happy about that. And from that, we'll get to our stated goal right now 14%. So overall, it's never going to be linear, but really excited about that improvement we're seeing in our margins.

Yes. Obviously, we've discussed this extensively, and you have done an excellent job managing the fluctuations in steel prices over the past few years, resulting in stable and increasing gross margins. Can you comment, Avner? Should we expect gross margins in the second half to resemble those in the first quarter, or was the first quarter's performance unusually high? Is a 29% margin possible?

Yes, approaching 29%, Brian. That's how I answer it.

For the second half.

Our next question comes from Brent Thielman with D.A. Davidson.

Great. I guess, Avner, maybe just a question for you as you move into the new role, just your perspectives on M&A, any different view from you on what Valmont should be focused on relative to some of the things the company has pursued and completed over the last few years. And I think just sort of similarly with that, do you take a different focus in terms of investing internally in the business maybe relative to what the company has done over the last few years? Just love to get any broader view on capital allocation philosophy from you?

Thank you for the question. Over the past three years, I have played a crucial role in the leadership team, working closely with the Board of Directors to establish our capital allocation philosophy and strategy, which remains unchanged. Our focus continues to be on driving the highest return on invested capital and delivering value to our shareholders, with the primary goal of investing in the business. Given the strong markets across our portfolio, we have significant opportunities to invest, as highlighted during Investor Day, including our major pole operations. We will maintain our investment strategy. Regarding mergers and acquisitions, we will stick to our established approach. We have a robust pipeline, and my experience in public companies and private equity will contribute significantly. We will place strong emphasis on acquisitions to support our growth objectives while considering the cost of capital over the next three years. In summary, we do not expect any changes, but we will continue to prioritize driving value through acquisitions.

Okay. For my second question, I understand how steel costs will impact the second half of the year. It appears that within the infrastructure segment, there are mixed demand trends, especially in the short term, with telecommunications and lighting transportation showing some softness compared to utility solar and others. How will this affect margins for that business segment as you notice a shift in contributions from these subcategories?

Yes, I'll take that one. This is Tim. You are correct. Our sales forecast expects a reduction in telecommunications, and as Avner said in his prepared remarks, commercial lighting is a bit muted. But with that said, still good margins for the Infrastructure segment. We expect them to be closer to what we saw in the first quarter versus the near record results we saw in the second quarter.

And I'll add to that is, overall, the strength of our portfolio. So while you might see some softness in one area like we mentioned, the commercial lighting, we have very strong demand on in the TD&S business. So we're able to use our plants and our capacity to support that business, which helps us continue keeping our plants busy driving business that has had very strong margins. As we mentioned, a lot of our businesses had backlog of over 40 weeks. So we're able to proactively manage our portfolio to make sure we both support our customers but drive high-margin business as well. So overall, we will continue to see strength in those businesses and keep on driving margin improvement.

Our next question comes from Brian Wright with Ross MKS.

First of all, congratulations Avner. Secondly, I wanted to ask, from your perspective as the CFO, are there any potential cost improvement opportunities that you see might be available that have not been considered until now?

Thank you for your question. Over the past few years, our leadership team has closely collaborated with the Board to align with our strategy, which we shared during Investor Day alongside our financial goals. We developed this strategy and framework from the CFO perspective, utilizing data, analytics, and technology to enhance value. My focus is primarily in the finance area, and I aim to extend that approach across the organization to drive internal improvements and generate additional revenue for our customers. We remain committed to enhancing the quality of our earnings. We've seen progress over the past few quarters, and we are working towards our goal of achieving a 14% quality of earnings. This is crucial for us and our shareholders, and we will seek every opportunity to streamline processes, enhance profitability, and ultimately increase shareholder value. In summary, we will remain focused on driving profitability for the company.

Great. And then I just wanted to get a little more color on the EMEA. Is that the rebound that you're kind of expecting there? Is that pretty much the reference to the Eco project coming on in July? Or was there anything else beyond that?

The situation is similar to our other projects. It's common for projects to experience shifts, so it wasn't particularly surprising that this moved from June to July. We have already started shipping, and our pipeline remains very strong in that area. We anticipate continued strength in that region due to the long-term market drivers that specifically support it.

Great. And just one last question, if I could. One of your peers has suggested that on the irrigation side in North America, if the harvest comes out as expected, the fourth quarter could be strong. I understand that given current conditions, it may not be prudent to forecast that. However, conceptually, considering the tax advantages of ordering in the fourth quarter, how would you view that?

Yes, that is indeed our expectation. Much of it will depend on the actual harvest, which is always the case, and we will see more clearly as we approach September regarding the yields and other factors. The market drivers are strong. If we look at net farm income, as mentioned, it will be the third highest we have observed in the last 10 years, with corn prices at 6% and 5.5% supporting high returns on investment. At the end of the year, growers will evaluate their financials and consider investment opportunities in capital during their tax planning. Our pivots yield one of the highest returns on investment. Therefore, the expectation is that in the fourth quarter, there will be typical ordering patterns similar to those seen in prior cycles. However, we will need to wait for the yield to determine how everything unfolds, and as you know, that is very difficult or impossible to predict. We'll just have to see how it all develops.

Our next question comes from Nathan Jones with Stifel.

This is Adam Farley filling in for Nathan Jones. I want to start by discussing the agricultural margins. You've indicated significant margin growth despite facing revenue challenges. How have these margins been achieved considering the decline in volume? Is it primarily due to the decrease in steel prices impacting the profit and loss statement?

This is Tim. I'll take that question. I would tell you, it's multifaceted, right? As we continue to talk about, we're doing a good job on pricing. I talked about how we are really focused on operational efficiency. That is contributing to the stronger margins in the second quarter. And then thirdly, you see in our deck that the change in international sales. In our prepared remarks, we talked about fewer projects in the second quarter. Fewer projects helped us see an overall better operating income margin.

I'll just add all the initiatives that we've been taking over the last several years, right? We're masked by COVID. But as we came out, we're just getting much better productivity through our plan better labor utilization, a lot of the operational excellence that we've done. So as I mentioned, it's multifaceted with the pricing, the operational excellence will continue to drive stronger margin.

Okay. And then following up on pricing within agriculture, mainly within the North American market. Is there any risk to pricing given the lower demand? Have you seen any evidence of the gross margin pricing in the industry? And if there is, how would Valmont react to that?

Well, I think by now you kind of know our philosophy around pricing. And we continue to take pricing leadership. And it's all based on the value we provide to the growers. And it has a very strong value proposition. And there's really no intention on reducing pricing. There's no reason to reduce pricing when we provide a very strong value in ROI, and the industry is kind of following the same path. So there should not be an expectation on reducing pricing.

Our next question comes from John Braatz with Kansas City Capital.

Avner, can you describe the Brazilian market in the second quarter? You mentioned that there was sales growth in Brazil, but that there was a period of slowness as farmers awaited financing. Was the first half of the quarter weak, and did the volume pick up in the second half of the quarter?

Yes. So thanks for that question. Going into the quarter, going into the year, we also had additional factors that we had a backlog going into the year, which supported a lot of our sales throughout the first half. But as the financing comes through, that provides significant tailwinds for the business. As we mentioned, the interest rate is very favorable compared to what other options are. And there are some other benefits of this program, for instance, a couple of years before you actually repay back the loan. So we will provide strong tailwinds. And again, I would really focus on the long term, right? The Brazilian market is very strong. It is a very important part of the overall GDP and economy of Brazil. And all those strong market demands with a growing population and land productivity, et cetera. So we're really excited about our Brazil market, and we do expect to see continued strength to support our long-term goals.

Do the sales in Brazil typically come with all the technology features, or are they more basic?

When I look at our overall journey of adding technology to our irrigation sales, the growers in Brazil tend to be younger and more open to adopting technology, resulting in a high adoption rate. As we enhance productivity for growers through remote monitoring, irrigation optimization, and agronomic insights, the suite we offer is seeing good adoption levels. I'm excited about the expected adoption in the Brazilian market. We are just at the beginning of this journey, and I anticipate that we will continue to integrate our technology suite with our other irrigation products.

Okay. One last question. Regarding the acquisition of HR in Australia, is the type of business they're involved in something you're exploring in other parts of the world, whether domestically or internationally? Is it a similar kind of business?

Overall, aftermarket is a significant component of our strategy for Valmont. We provided some insights on this during Investor Day. We appreciate that the aftermarket segment complements our irrigation business by allowing us to offer more to our dealers and growers. It has a more stable recurring nature, which we find favorable as it helps mitigate some cyclicality. Additionally, it features a high margin profile. Therefore, we are very enthusiastic about aftermarket opportunities in both of our segments. Our parts business in telecom is also quite strong. In summary, we are very optimistic about this acquisition and will keep prioritizing aftermarket as an integral part of our strategy.

Our next question is from Chris Moore with CJS Securities.

I know you don't always give backlog on a quarterly basis, you did after Q1. And maybe just directionally, can you talk about where it was at the end of the second quarter?

Yes, the backlog was at $1.5 billion. We did include that in the presentation.

Got it.

So strong backlog overall, right, really supporting kind of what we're seeing in our businesses. Majority of that is in the infrastructure part of the business, and see what we're seeing kind of mostly in the TD&S part of our portfolio, which has very strong market drivers and strong market demand.

Got it. That's helpful. Regarding telecom, you mentioned earlier a growth expectation in the 20% range. Given that carriers are now slowing down, could you share some longer-term thoughts? Do you anticipate that growth will remain flat or possibly decline over the next 12 to 18 months? I'd like to understand your perspective on this.

Yes, the long-term drivers have not changed. On a macro level, we continue to see increased data consumption, and when we look at the global 5G network, we expect that 85% of the world population will have access to 5G within the next 5 to 6 years. While there is currently a pause, we initially anticipated a different rollout for the network. However, it appears to be consistent, with a pause following the spectrum acquisition. Carriers will assess consumer adoption and their return on investment, which has also been affected by inflation and interest rates. This has significantly impacted some carriers. The recent earnings reports from AT&T and Verizon support this view. They have invested in spectrum and are now focused on achieving ROI, which means they will continue to invest in network densification. Although the pace is slower than expected, we anticipate a return to a more typical growth cadence, with double-digit growth expected in the coming years. Overall, the outlook is positive, despite a brief slowdown, and we remain enthusiastic about the continued growth of telecom.

We have reached the end of the question-and-answer session. I will now turn the call over to Renee Campbell for closing remarks.

Thank you for joining us today. As mentioned, today's call will be available later this morning for playback on our website or by phone for the next seven days. We look forward to speaking with you again next quarter.