Brian Lane: We stick around the margins, we’ll be happy folks.
Bill George: Yes, yes.
Josh Chan: Yes. Definitely. Understood. That’s a good problem to have, and congrats, guys.
Brian Lane: Yes, thank you.
Operator: And thank you. [Operator Instructions] And our next question comes from Julio Romero from Sidoti & Company. Your line is now open.
Julio Romero: Thanks. Hey, good morning, guys.
Brian Lane: Good morning, Julio.
Julio Romero: Hey, can you maybe talk about the margins you’re seeing in construction? Are they trending upward? And are you seeing any fixed cost leverage as that modular business continues to grow?
Brian Lane: For sure, construction margins increased the back half of this year into this year, we – there’s a lot of multiple reasons for it, but the current if it is good job selection with good customers. But I got to tell you, we’re executing in the field, which has always where the rubber meets the road for me, very high level, really are very grateful to the folks that go out to these jobs every day and the work they’re doing. So mines are up. And to me, a lot of it’s about the execution that we’re getting.
Julio Romero: Got it. Now great execution. I’m just curious if there’s any kind of fixed cost leverage that you see there as that grows [indiscernible].
Bill George: Well, you saw our SG&A obviously dropped from 11.5% to 10.6%. I would say we are definitely making investments to accommodate our growth in every – from all sorts of back office sales. But with revenue increasing the way it is, it certainly seems like our SG&A can’t go up as fast as that. So I don’t think you’ll see worse SG&A leverage over the course of the rest of this year. Now revenue increases. If we tell you we’re going to be sort of in the mid-teens and more likely in the high teens and revenue increase, and we were in the 20s this quarter, that means it’s going to average down some. So I would say maybe we don’t get additional leverage. But – so I don’t think you’d see additional leverage sequentially.
But I think year-over-year, you’re going to see a ton of leverage. And I don’t even know that’s just a guess, right? And it will – the important part is year-over-year as far as how the math comes down into what we’re doing. I hope you called that. I think I wasn’t very clear in that answer.
Julio Romero: No, that was a good commentary. And what’s your best guess as to when you see some of this cash flow reversal is expected?
Bill George: Well, so our history of getting that right is poor because it keeps waiting – it keeps happening later. I’d say late this year probably at some point. There is a sense in which it did flatten because we’re going to show you a slide in our investor presentation. Last quarter, we had a slide in our investor presentation that showed that we had earned, while we had cash flow $300 million more than we had earned in 2023. You’re going to see at the end of the first quarter that on a trailing 12-month basis, we will have cash flow more than we have earned by $300 million, here’s the thing. So the $300 million didn’t go up, right? It didn’t go down, but we didn’t get in our same-store businesses. Now, we did inherit some advanced cash from our acquisition, especially at Summit.
But in our same-store businesses, we didn’t get farther out. So I think before you start to give some of it back, the first thing that happens is you stop getting more of it. And there were certainly signs in the first quarter that we stopped getting more of it. Having said that, we’re earning so much money that cash flow – a big – when I looked at why our cash flow was still so big in the first quarter. In the past quarters, it’s been a lot of earnings and advanced cash. This quarter, it was just a lot of earnings and not giving back advanced cash. So there was – there is signs of that flattening out as it literally has to, right? If you – if somebody pays you to do a bunch of welding and electrical work, sooner or later, you got to go do the welding and electrical work.
And the welders and the electricians, you’re going to pay them. You’re going to have to pay them. It’s a fantastic problem to have, not really a problem. But it will look like a problem at some point because at some point in the future, our cash flow will be less than our earnings by the amount that it was more than our earnings. And it’s a high-class problem.
Julio Romero: Certainly is. Thanks for the color guys. Appreciate it.
Brian Lane: Thanks Julio.
Operator: And thank you. And one moment for our next question. And our next question comes from Brent Thielman from D.A. Davidson. Your line is now open.
Brent Thielman: Hey, thanks. Good morning, guys.
Brian Lane: Hey Brent.
Bill George: Good morning, Brent.
Brent Thielman: I’m going to ask about margins, sorry. I guess – you look at this quarter, I mean just take a step back, is the margin performance because you’re getting paid more generally for what you do or that you have the perfect mix of projects where you get paid more or you’re just that much more productive in the field?
Brian Lane: I would say all three. But the thing that we really can control on an everyday basis is how we’re doing in the field and Brent you heard this from a lot of times different version of prefabrication. The more work we can do sort of inside building and shipping in the field, the more productive, safer, and the higher quality of the work is and we’re doing more prefabrication every day. So – but it’s a combination of all three for sure, but we did – we really cannot minimize how well we are in execution on a per person basis at these job sites, including service. We’re talking a lot about construction. But our service folks are doing a hell of a job as well.
