Q3 2019 Earnings Call
Rental began momentarily.
Good morning, and welcome to the next tier oilfield solutions third quarter 2019 conference call.
Minor today's call is being recorded.
Hi, all participants are not listen only mode.
First question and answer session will follow the formal presentation for opening remarks, and introductions I'd like to turn the call over to Kevin Mcdonald Executive Vice President Chief administrative officer, and General Counsel of next year. Please go ahead, Sir Thank you operator, and good morning, everyone.
As a reminder, some of our comments today will include forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Reflecting next year's views about future events.
These matters involve risks and uncertainties that could cause our actual results could materially differ from our forward looking statements. The company's actual results could differ materially due to several important factors, including those risks and uncertainties described in both came group and Sanjay Energy service.
<unk> Form 10-K , where the year ended December 31st 2018.
Recent current reports on form 8-K, and other Securities Exchange Commission filings many of these risks or beyond the company's control.
We undertake no obligation to revise or update publicly any forward looking statements for any reason.
Additionally, our comments today include non-GAAP financial measures, including adjusted EBITDA and adjusted gross profit.
Please refer to our public filings and disclosures, including our earnings press release for the definitions of our non-GAAP measures and the reconciliation of these measures to the directly comparable GAAP measures. These are posted on our website under the Investor Relations tab.
With that I will turn the call over to Robert President and Chief Executive Officer of next year.
Thank you, Kevin and thanks, everyone for joining us on the call. This morning.
Before I begin and on behalf of the combined team from both key and seeing Jay.
I want to express high incredibly excited I am to be hosting our third quarter earnings call.
Following the closing of our merger with Sanjay Energy services last week.
Given the timing of our transaction closing today's discussion will cover keens results for the third quarter.
We're also excited to formally introduce our new company formed as a result of came to merger with Sanjay, which has recently announced we have named next tier or feel solutions.
It's now trades under the ticker and E X on the New York Stock Exchange.
I'm pleased to be joined by Greg Powell.
Chief integration officer of next tier and JK been Garland, Chief Financial Officer of next tier.
After a review of third quarter results for Keane.
JK, Greg and I will provide an update on next tier our strategy and outlook.
With that introduction, let's start with keens results.
For the third quarter.
Team achieved another strong performance delivering on the outlook provided last quarter and extending our track record of meeting our commitments despite a challenging backdrop facing the industry.
I'd like to touch them, a few highlights from the quarter.
From a top line perspective.
Total company revenue was $444 million approaching the high end of our guidance range.
Reflecting sequential growth of approximately 3% compared to the average third quarter, U.S. rig count, which decreased 7% sequentially.
We grew adjusted EBITDA by 8% to $89 million, you do proactive cost control and ongoing innovation that drove improved completion efficiencies.
We maintain strong utilization with 20 to fully utilize fleet unchanged from the prior quarter and we continue to benefit from the completion efficiencies enable bar dedicated model.
We generated $42 million a free cash flow.
And on a year to date basis gene has generated nearly $90 million a free cash flow.
And not allowing us to nearly achieve our full your estimate of $100 million or more and the first nine months alone.
Greg will discuss our third quarter results in greater detail the first.
I'd like to make a few comments related to our recently completed merger.
October the 20 seconds.
We held a successful vote.
And with shareholders of both seeing Jay and Keane.
Noted overwhelmingly in favor of the transaction.
About a week later on October 31st we closed our merger.
Creating an industry, leading U.S. last services provider.
We were extremely excited to complete our transaction as planned.
And appreciate the hard work from both teams for their contributions in developing a thorough integration plan.
Specifically I'm most excited about the unified approach across our operations teams and the opportunity said ahead of us.
I would also like to personally thank Don Gatwick for his partnership and leadership throughout this process.
Additionally, I'd like to extend my appreciation to shareholders for their continued support.
Throughout the integration process, we have remained focused on delivering for customers and ensuring continued safety and service quality.
As evidenced by our strong third quarter result.
Integration planning will now transition to execution.
There's work to be done and our entire organization will remain vigilant and seamlessly integrating our two companies with a laser focused on maintaining and improving service delivery for customers.
You did to the importance of this role Greg Powell has been appointed to lead this critical integration effort, where he is focused on overseeing the integration plans and capturing the cost synergies. We originally laid out and we're off to an excellent start.
We have a robust process in place.
And we look forward to keeping the investment community updated our progress all along the way.
Now turning to our latest view on the market.
Our business performed well throughout the third quarter.
As we progress into the fourth quarter pockets of softness have begun to emerge.
Given PON, primarily by our customers focus on operating within their cash flow and the associated budget exhaustion.
Coupled with normal year end seasonality and holiday schedules, we believe spending patterns throughout your in will be a dynamic the industry's can continue to face.
Looking ahead.
Customer budgets for 2020 are being finalized.
Well, it's too early to say with precision. We currently expect that overall 2020 activity will be flat to down slightly versus 29 thing with the normal uncertainty associated with commodity prices.
Some uncertainty around the cadence of spending throughout the year.
With that said.
We are seeing increased demand for next <unk> next tier services starting in January of 2020 based on recent customer discussions regarding the resetting of capital budget budgets for the already part of next year.
Bars, the supply side of available horsepower.
We're starting to see a few dynamics play out.
First.
We're finally seeing attrition of sizable amount of horsepower, which in our view.
Represents under maintain assets.
But in the current market backdrop don't make economic sense to revive.
We believe this attrition reflects the early innings of a much larger cycle.
Second.
Similar to 2018.
We're seeing a significant reduction in man fleets, which ultimately help balance the effect of supply demand equation.
And finally in the range bound macro environment, we have been operating in for the past couple of years.
We are seeing clear bifurcation in pressure pumping based on profitability.
She strength and ability to deliver consistent operating performance, while continuing to invest in innovation.
The new next tier is even better positioned to compete in these market conditions.
These are the realities of the market as it stands today.
And I would like to give you an update on what we've been doing in response.
In this environment, we're focused on controlling what we can control and this all boils down to efficiency, which to us it's simply means doing more with the same.
Or doing the same with less.
We identified four main areas of opportunity to drive efficiency.
First.
Investing in innovation to deliver further improvements in efficiency and sustainability.
The combination of experience capabilities and inflight initiatives from both companies provide next year with a tremendous opportunity to lead technology adoption across surface subsurface and digital.
I'd like to highlight a few of these areas that we're focused on.
As far as surface innovation, we're working diligently to simplify the way, we work, including well swaps systems.
Quit latch mechanisms and model on muscles, we're also investing inefficiency and sustainability via the newly designed to your for dual fuel engines, driving improved emissions and natural gas substitution.
On the sub surface side, we continue to partner with customers to design custom fluid systems to optimize fried delivery.
We're excited about the combination of keens fluid expertise, we're seeing jays lateral science expertise.
Our digital journey is also progressing nicely, we're transforming the way we look across the business.
We're collecting more data from more sources and starting to visualize an act on this data, resulting in significant learnings in opportunities.
Key efforts include real real time equipment health monitoring supply chain control tower and asset lifecycle management.
Second.
Proactively taking cost out opportunities across our company.
We're working with our operating teams a business partners to identify and execute on opportunities to optimize span across key areas, including direct materials.
Maintenance.
Labour and facilities.
For example, given weakness in northeast U.S. gas basins, we have been proactive and reducing cost associated with our footprint and support structure, including reducing our crew staffing during the third quarter.
This is an iterative process that requires constant recalibration to ensure were most appropriately structured.
While maintaining safety and service quality and remaining nimble to be able to respond to market opportunities as they arise.
Third.
Our merger with Sanjay encompasses two main areas of opportunity one we're now starting to capture the high confidence cost synergies that result from our merger.
As Greg will discuss later in our call, we'd love to upsize, the magnitude of synergies and accelerated the timing to achieve.
And to it allows us to pursue further efficiency by leveraging best practices to improve service to Liberty and profitability.
And finally evidencing a commitment from both companies.
To Rightsizing the business, our combined Workforces down approximately 20% since just before signing the merger and the second quarter of 29 team.
And we continue to be proactive and nimble and addressing market conditions.
I'll now pass the call over to Greg to discuss third quarter teen financials.
Thanks, Robert revenue during the third quarter totaled $444 million up from $428 million in the second quarter and approaching the high end of our guidance range.
Within our completion services segment revenue totaled $437 million, reflecting a sequential increase of approximately $17 million were 4% driven by continued execution inefficiency and now what impart by technology adoption.
The third quarter, we operated a total of 23 fleets and when factoring in white space. We had the equivalent of 20 to fully utilize fleets unchanged as compared to the second quarter.
On a fully utilized perfectly basis annualized adjusted gross profit was $19.9 million, a 7% improvement compared to $18.6 million in the second quarter and at the high end of our guidance of between 18 and $20 million.
We believe this performance continues to position us at the top end of the competitive stack and remains a key differentiator.
Revenues for other services segment, which includes our cementing operations totaled $6.6 million <unk> third quarter of 2019.
Adjusted gross profit improved a $1.2 million compared to $1.1 million last quarter, and representing 18.2% margin.
Adjusted gross profit totaled $110.5 million for the third quarter of 2019 compared to $103.2 million in the second quarter.
Total company adjusted EBITDA in the third quarter was $88.8 million inline with our guidance range of between 85 and $95 million and up approximately 8% compared to $82.4 million in the prior quarter.
Adjusted EBITDA for the third quarter includes management adjustments of approximately $12.2 million accounted for in SGN, a driven by $6.7 million a transaction cost related to our merger with Sanjay and $5.5 million, a noncash stock compensation expense.
Selling general and administrative expenses totaled $33.2 million for the third quarter compared to $32.6 million in the prior quarter.
Excluding the management adjustments as she and they totaled $21.1 million unchanged from the second quarter 2019.
Turning to the balance sheet, we exited the third quarter with cash of $157 million, reflecting growth of $40 million compared to $117 million at the end of the second quarter.
We generated approximately $84 million of operating cash flow for the third quarter.
Capital expenditures totaled approximately $42 million driven by maintenance Capex and investments in technology, resulting in $42 million of free cash flow.
Total debt at the end of the third quarter was approximately $338 million net of unamortized deferred charges and excluding finance lease obligations effectively unchanged versus the second quarter.
Net debt at the end of the third quarter was approximately $181 million, resulting in a leverage ratio 0.6 times on a trailing 12 month basis.
We exited the third quarter with total available liquidity of approximately $323 million, which includes cash in availability under kings asset base credit facility I'll now hand things back to Robert for a more in depth discussion of next year.
Thanks, Greg.
Look we're excited to announce next tier our new name.
In conjunction with the merger.
The name and bodies continuous improvement and serves as a steady reminded to our employees and partners and we will always be innovating to move up to the next tier value creation.
Before reviewing the key priorities of next tier I would like to quickly reiterate the five primary benefits of the deal.
First.
We're increasing operational and financial scale across services and geographies.
Next year owns a base of 2.2 million high quality will maintain hydraulic horsepower.
We'll offer customers a more scaled and wider range of completion services, including wireline coal tubing, cementing and well services.
We're well diversified across geographies with a national reach in local presence, including the Permian Marcellus Utica.
Eagle Ford Rockies Bakken mid continent in California.
Second we expect our combined platforms to drive significant cost synergies, we have a robust plan in place and our shift into execution mode now that the mergers officially closed.
Third our strong financial platform, which includes a solid balance sheet and liquidity position.
On a simple pro forma basis, combining CNG days and our balance sheet as of September Thirtyth Thirtyth without further adjustments next tier has net debt and a leverage ratio of effectively zero and total liquidity of $712 million.
Positioning us to execute in a range of market conditions, while also serving as an enabler to continue into invest in innovation.
Hey, wait alternatives for shareholder return.
Fourth are complimentary cultures and operating philosophies.
With the combined base of talent.
Our best athletes are already on the field with a shared goal delivering leading performance on safety service quality and efficiency.
We remain committed to maintaining and developing partnerships with highly efficient customers on a dedicated agreement.
And finally, we offer an enhanced platform for continued innovation.
Together, we're focused on helping our customers address their challenges by leveraging technology with solutions for now tomorrow and the next generation.
I've spoken with many of our customers who share in our excitement of the company, we've created and our partnerships going forward.
At the time of our merger announcement, we emphasize that we were creating an industry, leading U.S. land completions company.
During the integration planning process. Our leadership team spent extensive time building our alignment and a formulating our priorities something did I believe is critical to the ensuring of our success.
Well the merger completed its important to tell our stakeholders exactly how we intend to succeed.
Next year, we'll achieve its goals by executing on all four of these points of distinction.
First.
Next year is founded on an unwavering commitment to partnerships and helping customers when by unlocking affordable reliable and plentiful sources of energy.
This includes partnering on a dedicated basis with high quality customers in all aspects of the relationship through open collaboration.
Second.
Next year, we'll be focused every single day on delivering leading safety performance.
Safety is a key differentiator that enables our partnership approach and honors our commitment to the well being of our employees and partners.
Third next year, we'll strive everyday to deliver leading efficiency on behalf of our customers.
Constantly challenging ourselves to do more.
We're relentless in our pursuit of efficiency, which creates value for all of our stakeholders.
Fourth.
Next year is committed to leading the charge on innovation.
We see every day as a new opportunity for improvement.
Never selling for status quo, we continue to believe the innovation will drive the next leg of safety efficiency and sustainability.
We're committed to being the clear choice for oil and gas operator, seeking a forward thinking partner.
These priorities and the values they represent or not an aspiration, they're an expectation.
It's the commitment we made to our customers employees and business partners and how we intend to drive success over the long term.
To learn more we invite you to explore a newly launched website, which you can visit at Www Dot next tier Oh with this dotcom.
I'll now pass things back to Greg for an update on synergies in the asset portfolio.
Thanks, Robert as Robert noted earlier, we initially identified $100 million of annualized cost synergies at the time of our merger announcement.
As our integration planning progressed and visibility increase we found additional opportunities.
We have to favorable updates to share with regards to our synergy commitment.
First we are upsizing the magnitude of our expected synergies, we now expect to achieve $125 million of cost synergies up from our original target of 100 million dollar and second we're accelerating our forecasted timing to achieve full run rate synergies, which we now expect by the end of the second quarter compared to our initial estimate.
Within one year of closing, we expect to realize approximately two thirds of these synergies in fiscal year 2020.
Our confidence has increased we're keeping our eye on the ball and we'll continue to rely on our strong experience with M&A integration in an effort to build a leading platform and realize the significant base of synergies we plan to keep the investment community updated on progress and are committed to tracking synergies separate from cost reductions related to.
Activity levels.
As part of our integration planning, we performed a diligent study of our joint asset base and have them. Some updates on the go forward marketing capacity.
Within hydraulic fracturing the process involved two main pieces.
First we think the definitions of horsepower in fleets across our two companies.
Second we establish horsepower per fleet requirements based on the increasing service intensity, we're facing in the field plus the need for rotational horsepower to support a rigorous maintenance program.
As a result of synchronizing definitions standardizing fleet configurations, and taking assets out of service, we effectively reduced our total combined fleet by 10% or five fleet, resulting in 45 high quality hydraulic fracturing fleets and permanently reducing our fracturing fleets by approximately 100.
1000 horsepower.
100% of our fleets are market ready without any required capex to redeploy.
We are similarly high grading equipment across wireline coil, cementing and well services retiree equipment that we believe cannot generate attractive returns.
Summary of our actions includes the following.
Within wireline our combined asset base included 161 units of this amount. We've retired 43, resulting in 118 marketed assets.
For coil tubing or asset base included 30 total units.
This amount we retired five resulting in 25 marketed units approximately 60% of which are large diameter.
On the cementing side, our combined asset base included 140 units of this amount. We've retired 39, resulting in 101 marketed units.
Our well service segment as primarily comprised of our rig services business over 364 total Workover rigs. We retired 88, resulting in 276 marketed rigs we're proud to be playing our part and reducing capacity permanently removing a sizable base of equipment a portion of which has operated in the last year.
Sure.
With these efforts completed our marketed equipment base is even stronger higher quality and capable of efficiently servicing our customers needs today and into the future.
Now I'll turn the call over to JK for some comments on our outlook.
Thanks, Greg.
Before I start.
I would like to comment that the company plans to file an 8-K.
Include CN Jays historical financials, including year to date, Brazil's true to September 30.
Taking a look at next year's consolidated pro forma balance sheet.
We had a cash balance of approximately $335 million as of September thirtyth.
Total debt at the end of the third quarter was $338 million, which was comprised of kings legacy term loan facility.
Our next Kluge finance lease obligations.
This results in net debt at the end of the quarter of approximately $3 million, which will reflect a total leverage ratio of essentially zero on a pro forma trailing basis.
Real quickly executed on further improvement in our financial position.
With the successful expansion of our asset based revolving credit facility from $300 million to $450 million effective at close.
With this expansion.
Total pro forma liquidity is $712 million, which includes $335 million in cash and $377 million of availability under our asset based credit facility.
The Upsized facility, where our expanded banking group.
As a favorable outcome and it demonstrates our lenders recognition of both financial and operational strengths next year.
We extend the thank you to our expanded banking group for their support and we look forward to working with them over the coming years.
Now turning to outlook for the fourth quarter.
Given the timing considerations of our recent close.
We are providing our outlook broken down between legacy keen and CNG.
For revenue came is expected to total between 310 and $340 million and Sanjay is expected to range between 290 entry into the $10 million.
Resulting in total next year revenue of between 606 hundred $50 million.
At the adjusted EBITDA level came is expected to total between 50 and $60 million and Cmj is expected to range between 10 and $15 million, resulting in total nextera adjusted EBITDA of between 60 and $75 million.
Okay.
Relative to the third quarter of 2019.
It was primarily driven by lower utilization, mainly due to customer budget exhaustion and seasonality as well as continued competitive pricing.
With that I would like if possible to roll that for a discussion of our future outlook.
Thanks Jay.
Now, while the fourth quarter and not industry has become more volatile and it's still too early to assess next year the too much precision.
We want to frame, how we're thinking about the earnings power for next year.
The framework, we're about to provide is based on a couple of key tenets.
First the environment, we're now in feels a lot like last year.
We're facing very similar dynamics, including range bound macro conditions overcapacity.
Contract renewals and the need to drive efficiencies.
In addition, we have high confidence in our ability and track record to execute on the things that we can control.
Which include Rightsizing, the cost structure of our business.
Executing on synergies and driving the next leg efficiencies.
So now let's look at some of the possible scenarios for the earnings power of next year.
First as an anchor point.
Assumed that the market recovers from the abnormally low activity expected in the fourth quarter.
The increased activity driven by MP budget resets.
Offset by reduced pricing.
In this scenario.
Our business could perform at levels similar to what we expected in the fourth quarter.
Or approximately $270 million of adjusted EBITDA at the midpoint on an annualized basis.
Layering in pro forma $125 million in synergies results and approximately $400 million of adjusted EBITDA.
While we believe this case to be overly pessimistic.
It does help frame a conservative case of potential performance.
Second.
As an alternative scenario.
We experience a market that is very similar to this year.
In this case, we start with a full year 2019, adjusted EBITDA estimate of approximately $450 million.
Plus the $125 million of pro forma synergies.
Resulting in $575 million of adjusted EBITDA.
If you assume continued year over year pressure driven primarily by additional price concessions to support our customers. This would drive adjusted EBITDA degradation of approximately $150 million, resulting in adjusted EBITDA of $425 million.
Applying a more favorable outlook.
Where price and utilization stabilize due to a reduction in effective capacity.
We exceed our synergy target.
And capture a higher base of efficiency.
This could result in recovering at minimum half of the EBITDA degradation.
Resulting in adjusted EBITDA in excess of $500 million.
In all of these scenarios, we generate significant free cash flow.
Our annual capital investments will include maintenance and strategic investments in innovation.
Assuming a capex range of $165 million to $225 million.
Driven by our ability to flex capex with activity and using the adjusted EBITDA bookends of $400 million to $500 million, we generate free cash flow between 235 and $275 million.
Less than a free cash flow yield well in excess of 20%.
While simplistic.
Our intent is to provide a framework of how to think about the earnings power of next year.
On this base of free cash flow generation.
And with the formation of our New Board, we will develop next year's approach to capital return.
Overall, we believe we were in a differentiated position across our peer set.
Excited to forge ahead, as we focused on delivering leading efficiencies for customers.
Returns for investors and a rewarding work environment for people.
With that we'd now like to open up the lines for Q and I.
Operator.
Thank you will now be conducting a question and answer session and the interest of time, we ask that you. Please limit yourself to one question and one follow up if you would like to ask a question. Please press star one on your telephone keypad.
Permission, telling what indicate your line is in the question can you May proceed start to feel that you have your question from the Q for participants you think speaker equipment, maybe necessary to pick up your hands that before passing the Starkey is one moment. Please pull for your question.
Our first question comes from the line of Tommy Mall with Stephens Inc. Please proceed with your question.
Good morning, and thanks for taking my question.
Good morning, born Tom.
So you all have only.
Ben operating as a pro forma for a week now post close but there was obviously a lot of cooperation in advance of close.
Robert I wondered if you could comment on some of the additional things you learned as you approach clothing and and have since then in terms of the challenges both the challenges and the opportunities.
Specifically on the synergies if you could give us context on what gave you optimism to upsize the the number and then pull the.
The forward all that.
Yes, good question, Tommy and it has been a very very a fun process had to admit thanks to the cooperation that we had between the two companies, particularly to leadership area.
But but also the the the cultures are the two companies are very very similar particularly in the field, where the where the revenues being generated.
And what we've learned a lot is that we both have best practices that we can learn from each other that's going to make a difference on a bottom line and that's you know not necessarily even in the synergy a assessment.
So that's one thing that made me a lot very comfortable with the situation because where the rubber meets the road is working better than you could then I would have even expected.
Second thing I'd say is the customer feedback has been extremely positive I would've expected, maybe a little bit of concern, but they mainly were concerned about us being able to continue to deliver excellent service and Q3, we both kinda did that.
On the synergy side I would say that he knows that it was grass roots process that both teams working together in conjunction with some outside consulting help to cap help us make sure. We had a good cost baseline for the first half of 2019, the benchmark off of and then as we went through the process that.
Without a lot of coaxing.
To try to get the number of from from from me I've been very impressed with the fact that they've been able to find additional synergies given us the confidence.
Commit to 125 million.
So so far so so good you're right, we're only a week into it we got more to learn but so far I'm extremely happy and and Gregs running an excellent process so far.
Okay. Thank you for that Robert and then shifting gears to capital returns, which is something that you alluded to and your earlier remarks.
Certainly it it's going to take some time with of with the.
Combined company to.
Figure out the go forward plan.
In terms of a buyback, which is something that a keen had been pretty aggressive with prior to signing up the merger agreement.
So I know you can't give us the final answer now but to the extent you can give us any indication on where you and potentially the border leaning there.
Your stock is certainly a very attractive at these levels you have.
A lot of dry powder or that you could deploy so any thoughts there and then also specifics on timing of when we might hear from yet again with a more final decision on that point.
Hey, Good question Tommy look I would say we had a first board meeting this week to get to get the two boards together.
And the nice thing is that we do have a nice warchus there to have this this opportunity you know a not only the balance sheet, but the projected free cash flow generation is going to support whatever decision, we make there as far as capital returns go.
Lets say the board's challenged a straight away to come back with a a fool you know projection when we want to do about that going forward.
Keeping in mind at the market is got some uncertainties in it and the.
The go forward look there's going to be a balance between stopped Bob that potential dividend and you know strategic investments that we might need to Mike into the future too.
Devilish further differentiation.
So timeline I would say no relatively soon.
But at this point, it's just a little bit too early for us to be able to come out with a clear guidance on that.
Fair enough in just a quick follow up to make sure I heard you correctly. Robert you mentioned the three buckets fair to assume those are not mutually exclusive so whatever plan you might recommend to the board could include some of all three.
That's a that's correct okay.
Thank you very much I'll I'll turn it back.
Thanks, Tom Thanks Toby.
Thank you. Our next question comes from the line of Sean Meakim with JP Morgan. Please proceed with your question.
Thank you good morning.
More Johnny.
So there's a pretty significant contrast in profitability between keen and seeing Jay but this was no. This was known when you agreed to the merger. So could you maybe just talk about your expectations for convergence between those two levels of profitability on the one hand.
What's your ability to to pull ups TJ is margins over time, it and what or how did that specific strategies. There on the other as you're going to what could be more difficult year in 2020 confidence in being able to sustain keys margin advantage. So we're not seeing convergence coming from that direction.
Yes. Good question look I would say I'd say this is that as we've come together. It's early is still already day scores.
And as I mentioned, the a bit earlier.
Best practices of managing the Frac side of business.
There's been some real nuggets on both sides that we both probably wish with a thought of earlier before we got together. So these things are going to going to help us.
The opportunity to leverage the support structure on a larger scale is not a minor point that gives us steel ability to a disc we got better profitability.
But I would also point out that in the synergy numbers that that weve projected.
Closing the gap on profitability per fleet is not is not part of that.
And I'd also add that.
You know the the guide that we provided on C. and Jay for Q4 is not really indicative of the performance in general because it was more related in Q4.
The Q4 God to client mix.
So.
If you think about.
Looking at seeing Jays history.
From Q3 to Q4 Q4, Q1, 28 2018 to 2019 was a very similar.
Start so to too.
To benchmark Q4 is is the gap I wouldn't do it.
To put to give you time and about.
How would converge, it's a little bit already for us to be able to do that but I hope all those factors that that outlaid there.
Is it you can see that there's a number of moving parts. The second point I'd make though is that when you look at the well construction and intervention business and the well servicing business inside seeing Jay.
The momentum the profitability momentum there is up is already improving in it and I'm impressed and happy about it.
They've been rationalizing and under their underperforming regions inside well servicing.
And the support cost is come down dramatically.
And the divestiture of the fluids business inside well servicing has promoted improved profitability. So all of those things.
Give us a lot of ER.
A lot of momentum as we roll into latter part of Q4 in into into next year.
Well, we'll get more visibility on the profitability per frac spread going forward.
Intermodal wise.
Understood. That's fair so that could be meal, maybe also talk little about the contribution to those EBITDA production projections for next year in terms, how much is coming from the non frac businesses are wireline coiled tubing, cementing a well services.
She works and are they contributing to those numbers and you think about the flex one that the downside to the upside case.
How much flex as it comes from from those non Frac product lines.
Yeah, Hey, good morning, Sean It's Greg So if if you in the Barclays deck, we put out the second quarter contribution from those businesses is about $33 million those are relatively.
That's a good run rate to use you know, it's obviously dipped in the fourth quarter with activity, but the improvement as Robert mentioned on the call side will give those some uplift. So I think you know 35 to 40 is a good range of EBITDA for those businesses in a in a more steady state volume environment and there's not as much flex and those are obviously isn't the frac business with you.
Realization and a and pricing.
Got it yes as expected great. Thank you very much.
Thanks.
Our next question comes from the line of Marc Bianchi with Cowen. Please proceed with your question.
Hey, Thanks, Robert I wanted to go in this Sanjay and I guess legacy came a little bit into fourth quarter I know, maybe they're not representative of where you kind of see the businesses over time, but just just to help us understand what the underlying assumptions are maybe on a on a profit.
Our fleet and number of fleets.
If you could help us out a little bit.
Yeah, Hey markets, Greg So in the fourth quarter, we have the fleet count is 17 for Kane and eight for seeing Jay So total of 25 fleets.
And then on EBITDA per fleet canes at about 13 million.
And Sanjay at about six and a half for combined weighted average of 11.
The underpinning of the guidance midpoint of the guys.
Okay.
Okay that that's really helpful and I mean, it gets as you as you alluded there maybe some.
Some unusual.
Customer mix for foresee Ajay and the fourth quarter.
Can you help quantify that what you know where would that run rate be or what kind of profitability, what we'd be looking out for the Sanjay side of the business. If you didn't have this sort of unusual that.
Well look up I would just say that the Q4.
Change from Q3 is driven a lot more by the schedule than it is anything anda.
A lot of the customers are becoming more clear about where the holiday plans are and the the.
The lack of a full schedule for these fleets as we get into the latter part of the November around Thanksgiving through through the end of the year is what's driving a large part of that but I'd also point out that.
The guide so for has been that we've got a lot of robust.
The man in Q1 for these fleets to come to come back online and I think you'll see that EBITDA up a fleet.
Move back.
Towards the counter the Q3 combined number.
As opposed to stay in that Q4 area.
So mark a historical you know I think the questions. We got earlier on the disparity of profit per fleet. When we signed a deal in the Twoq numbers, which are public.
Teams in the neighborhood of 14 to 15 million of EBITDA up or fleet for second and third quarter in Sanjay was in the 10 11 neighborhoods that was kind of the the disparity in a more normal market conditions.
Yep.
Okay. Thanks, and then just in terms of the in the the sort of 400 million scenario that you laid out I think he said it it assumes some.
Little bit activity recovery offset by some reduced pricing how much pricing decline or you kind of expecting there and what have you seen so far do you do you have a good handle on kind of what that what that downside could look like in is that something you've already sort of talk through with customers at this point.
So you know if you remember from came perspective, when we went into 2019, we took proactive position in the latter part 18.
To go to our customers.
Proactively to trade.
Early price correction.
For sustainable pricing through 2019.
And during the year, we were able to call, but some of that cost taking costs out of system called by some of that profitability.
You know we're trying to do the same thing a bit this year and that process is still going on.
And I would say that there's a little bit already in a in the Q4 numbers in there be a little bit more and in Q1, but again largely the impact on a number so far.
Look at Q4, and our current views.
In the Q1 is it's mostly activity driven in Q4's, which we see the bounce back so that that scenario that you referred to as essentially just trying to point out that even in abnormally low Q4 activity run right you project that through 20, Twond and that's not what we're saying when it to do but if you did even in that case, we're still generating.
Free cash flow north of 20%.
You know that that was the point, we're trying to make there as far as guiding on price beyond that I think it's a little bit too early for next year.
And you know the spot market pricing is pretty well been discussed in previous calls and so forth. We don't have few debt too much. It just said, we're not anticipating hugely in that in that part of the market.
When we do we're typically trying to go in with customers who are efficiency minded long term.
Because efficiency in price or so so much hand in hand, well, we can get a commitment for certain volume the price can be much more flexible than it is like in the spot market. So we sometimes delve into the spot market to get a foot a toehold to demonstrate the efficiency and then established pricing going forward. It.
Providing a lot of value for the customer and a fair deal for us.
That's kind of our overall kinda overriding pricing ever right now.
Okay, that's fair or if I had just one more on the just on the net debt position the $3 million that just to confirm that does not include the payment of the dividend.
Correct, that's correct that September it's a September number from and we.
Yes, after the dividend that's before that it.
That's before so after that dividend that at September would be what.
So be a 335 or cash minus 65 compared to 338 of of debt.
Okay, great. Thanks, guys.
Thank you. Thank you question comes from the line of Dan Boyd with BMO. Please proceed with your question.
Hi, good morning, guys.
One of them.
Of course, I think Greg it might be uniquely positioned to answer this one but there's just a lot of investor concern out there that.
Keens legacy profitability or the gap relative to peers isn't sustainable and that all pressure pumping results are sort of going to revert to the remain revert to the mean, primarily just due to pricing pressure, but yeah, I think having now seen the operations of both companies, where keens profitability has clearly been top quartile. So.
And Jason was not a that's clearly in the Fourq. Your numbers. So I was wondering how much of that higher profitability would you attribute to higher pricing versus operational efficiency and then when you think about the value being delivered to the customer in terms of stages or pumping hours per day. However, you want to define it how do the two fleets compare.
Yeah.
Look one thing I would say is that when you look at the the profitability asked but Oh the completion crews you know Brock.
Being part of that and wireline being another part.
The fact that we have integrated operations at the Wellsite Ism isn't is a factor in the differentiated profitability because of it delivers differentiated.
Pumping efficiency.
That's a big factor I think that sometimes not fully appreciated in the market you know about 80% 85% of our fleet.
Pump and have our wireline with it given us the ability to crew that and put supervision across the entire completion spread is a way to lever the cost a bit.
One thing.
And you know I don't think you can talk about price being that big of a factor without talking about efficiency because we're in the same market as everyone else. When it comes to the pricing. It's just that when you put efficiency and pricing together and then focus a lot on on on taking the nonproductive time out of the business you can difference.
Can you can continuously differentiate I think yes, so dan the only thing I'd add to that is.
You know look you know frac equipment is frac equipment, and there's innovation going on in the space, which is exciting but at the end of the days the management system and.
And the and the customer under writing and customer selection that makes these things more profitable and if you think back from a keen history perspective on right. When we IPO to about three years ago. We had just completed the try can.
Asset acquisition and tripled our asset base and there was when we're on the road to the IPO show that was a lot of trepidation about how we're going to take these assets which were deemed to be.
So suboptimal assets and put them into gains model.
And then King generated 400 million EBITDA last year and on track for 300, this year and significant cash flow. So would you say and Sanjay. This this merger is much better position because as Robert mentioned, there's a lot of best practices between the two companies will leverage so you're you're getting a running start versus the in 17 was more just getting assets off the fence. So.
I'm very confident I think we've demonstrated track record in the and the management system for customer selection execution on the well site the dedicated model to take assets and drive profitability and I think that's what's driving the bifurcation in the space.
Okay. That's helpful and just to summarize that I can just correct me if I'm wrong, what you're saying is there is actually not much of a pricing difference. It primarily comes down to operational efficiency and there's a little bit of not completely apples to apples because of the the wireline being included is that a fair summary.
I think that that's a fair summary, so maybe for the last part I'm not sure exactly you mean, there other than say the I think the wireline leveraging frac efficiency because of the combined team aspect of it if that's what you mean, okay, yes, it's material, yes. It okay.
And then just on that forward guidance or the forward expectations for the the first quarter potentially having.
Your profitability for crew back to <unk> third quarter level, given that there is some pricing pressure in the system or are you, saying that the synergies will offset the pricing pressure to get that fleet profitability back up there or is there something else that you see offsetting some of that pricing pressure.
Look I would point out that again Q4 at is largely an activity issue where that efficiency component wont be is good because of the white spaces in the schedule. So recovering that will be a large part of.
Yes, so Dan I wouldn't characterize this as both on the price environment I think the scenarios. We laid out the first one is assuming that you get a volume recovery and then that gets offset by price and we said if the fourth quarter profitability was to track overlaying. The synergies you still generate over 200 million a cash the second scenario was if the price.
Leasing environment stabilizes, a little bit based on supply and demand.
Balancing out on effectively man crews, which we saw happened last year.
You know then then then that that pricing pressure might dissipate and like Robert said, we're in the middle or that we're in the middle or that you know the evolution of of getting things set up for next year. So I think those are the scenarios. We're trying to lay out for the you know the earnings power of the platform with where we are today you know it's going to commit more time on pricing I would just point out that.
No we're able to go to our customers are pretty much year in year out and deliver deflationary call.
And claw at by taking out operating cost more improving efficiency and the operation and that's the same thing. We're we're telling them again as we go into 2020.
Okay, and then lot last one for me is when you look at the pro forma fleet.
And everything that you're going to have sort of you know available.
Has all of that worked at some point in the past three years and if not.
What percentage that fleet, maybe hasn't hasn't worked in the past few years.
Yeah, I'd say for the assets were retiring is probably you know about half of them have worked sometime in the last year and have not I mean, it's different by product line. The well service you pricing more stacked equipment given the overcapacity in that space, and then wireline and Frac you see stuff that that work more recently.
And then we have lots of stuff that's being retained it. This is any of that not worked.
No. The stuff. That's been retained is all worked within a year and isn't very good shape and we mentioned in the prepared remarks that their zero capex required for any of that equipment to go to work.
All right, which goes back to your gains philosophy over time to have Kip equipment fresh to.
Investing fully on on the <unk> acquire maintenance cap it.
But you know aren't I came out it clear in your prepared prepared remarks is a but I felt that they asset rationalization.
And some of the early morning reports of dollars, taking a little lightly but you know if you look wireline, we took 25% of the fleet out cementing, 25% or the fleet out well servicing rigs, 25% of the fleet out coil 15, and as Greg pointed out 10 in fraud, I mean, we took a big bite at it.
During this process.
Yeah, I'm, sorry, thanks, guys I'll turn it back.
Thank you. Thank you.
Question comes from the line of Stephen Gengaro with Stifel. Please proceed with your question.
Hi, Thank you and good morning gentleman.
Good morning, [laughter], two things one isn't I just wanted to confirm children, but your maintenance capex.
Expectations about 4 million of fleet I think that's what you had in the Barclays presentation is that.
You're correct that's correct.
Okay, and so when we think about your youre sure the parameters around the Capex you guys gave.
How how should we think about leads coming back into the market and what I'm sure. The <unk> what will be your key sort of financial decisions.
Or parameters on when you bring fleets back I mean, obviously, the fourth quarters light right, but when you when your work beyond that are there other levels of EBITDA per fleet that you sure will require true.
Reactivate fleets that are ready to come back.
Oh good question.
So look when we are going through that process thinking about how to redeploy the dry powder that we have.
We have the customer base that we already have that.
Some of these have plans in the future to to increase the number fleets. They have deployed that's one avenue.
But but one avenue that I'm extremely excited about us failed to mention earlier was that [noise].
Buying companies sales and marketing organization is as much enhanced to what we had individually.
And I mean, this I don't I don't say that lightly because it would give us a better ability to sift through the customer opportunities out there to find Likeminded partners that are focused focused on efficiency.
So the reason I say, it said that way simply to say that how we might deploy.
New fleet into the market would have a strategic aspect to it we might enter the market and the spot market a perhaps to <unk> tried to convert one of these clients to the efficiency model that were a deficiency dedicated models that were used to being able to use a lot.
So that there's aspects of that but certainly we would kind of we'd drawing the line it is not being.
In any case now cash flow negative.
And the and that may be distinguishes us somewhat from some parts of the market.
Okay. No. That's okay. That's helpful color and then just finally through your.
When you look at the overall capex for the year next year that <unk>.
The the range you gave is is that beyond those maintenance levels for the Frac fleet is that.
Is that maintenance on the rest of the assets or is there some incremental capex in those numbers based on activity.
Yeah, It's a combination of two things Stephen it's a it's the maintenance Capex and then it's the capex for the non Frac product lines, which runs about 40 million a year depending on activity and then the last piece is strategic which is to can then continue to invest in a innovation.
Great. Thank you.
Thank you. Thank you.
Our next question comes from the line of Chase Mulvehill with Bank of America. Please proceed with your question.
Hey, good thanks for squeezing me in Hey, Hey, Robert.
Yes, so I want to come back to CNG, a little bit and just trying to connect the dots was a pro forma it looks like seeing Jay had some really strong cash flow in the third quarter. So I don't want you could maybe provide some color around what actually free cash flow was it a in the quarter for CN, Jay and really kind of what.
Drove that.
Yes, Hi, Jamie Good morning. This is young case, a look we I can't really talk about the number to numbers will be coming out and about two weeks, but.
But the organization.
As a whole CN Jay.
Performed relatively well on on the free cash flow.
Okay. There was no one offs or anything that it kind of drove that that cash flow number correct.
No that I'm aware of.
Okay, and then sticking with cash the cash or how should we think about cash integration Greg as we go forward just trying to layer in some cash costs.
You know into the cash flow statement.
Yes, so look theres theres kind of three pieces to the equation. There's the you know the dividend was paid that 66 million on the deal cost side for the transaction I think we'll have about 50 million 20 of that was sunk in the second and third quarter and probably another 30 in the fourth quarter for pure.
Transaction costs and then the third bucket is cost to achieve synergies, which we estimate at about.
50 million 50 to 60 million, 50% of that'll be in the fourth quarter of 19, and the other 50% will be in the first half of 20.
Okay. All right. That's helpful. Appreciate it and that lot heavy Greg.
Synergies in the fourth quarter, how much are included in the Guy.
Look synergies in the fourth quarter nominal probably a couple of million dollars and the reason for that is the way the way you ramp up to our 125 by the end of the second quarter means you got to get to a run rate of about 10.5 per month. So when you annualize that you get to the 20. The 125. So what we're saying is will be at that 10.5 per.
Month synergy run rate by end of June .
So the second six months, you'll get a full 10.5 per month. So that gives you kind of half of the 125, and then between close and Jim will be ramping that that run rate up. So that's kind of math with very small amount in the fourth quarter.
Okay, all right to tell how to Rebecca thanks for your own.
Thanks Jay.
Thank you. Our next question comes from the line of Chris <unk> with Wells Fargo. Please proceed with your question.
Morning, guys.
Warner Bros money Chris.
Just curious about the guidance you gave for Fourq you 17 fleet for keen in eight for CJ is that on a fully utilize basis or is that active fleets because that kinda could help inform.
Any kind of rebound Q1 20, if you expect that to fill out from additional activity per fleet or.
If you expect to react if any any fleets in that scenario.
Yeah. The fleet numbers I gave earlier the 17 in the eight for 25 fleets is on a fully utilized base.
Okay and can you give the active fleet number or they had in Threeq you for each company.
22 for keen in 11 for seeing Jay.
So 33 fully utilized.
Thanks, I'll turn it back.
Yeah, Thanks, Chris Thanks, Chris.
Your next question comes from the line of John Daniel with Simmons and company. Please proceed with your question.
Hi, Thanks.
Greg you touched on innovation can you are saying if you guys plan on introducing an electric option and 2020 or a willingness to purchase new pump designs.
Yes, so on the Nexgen equipment I mean, we.
You know, we we worked very closely with our customers John or trying to go out at a pace that makes sense for what the requirements are and also make sure. We have return profile and that's kind of consistent with what we've been saying we don't think the electric math works right now if there's a circumstance where a customer wants to go in that direction and where their partner War, we'll certainly evaluate options if theres a mutual.
Return, we are finding dual fuel as we've talked about before to be a really nice bridge option too.
At the arbitrage on the fuel we've got nice portfolio of tier two we were one of the early testers of the few prototype units of the tier four DG be we've since made some investment decisions in the tier four GGB I think we're one of the the probably pioneers on putting that into production.
And it's all driven by customer demand so when the when the demand profiles there will continue to expand but the dual fuel it looks like a nice bridge technology as the electric solutions mature and hopefully the cost comes comes down.
Okay can you say, how many fleets youre, a retrofit with tier four DGD.
We're not putting out a number I'd say, we're dipping our toe from a fully perspective, and then any subsequent bills will be demand driven.
Okay.
On the retired assets.
X frac.
Are you. So are you actually scrapping out are you going to sell any of those old assets.
They're gonna be scrapped.
Good.
Right got it and it wouldn't visit up would you be.
And do you have the opportunity to reactivate fleets in Q1.
Seen sort of the disparity in the EBITDA for fleets.
Is there what is the threshold meeting.
Keen group EBITDA per fleet or would you reactivated the CJ level walk us through what's that number that would entice you to bring a fleet back.
Look like Robert said, it's a cash flow number so it's not it's just it did its consistent upon our new cost structure. So the two things we look at we take GP per fleet minus EBITDA per fleet minus Capex for fleet. So were 4 million Capex and then.
Let's say DNA send their four to five to drive the synergies out you're looking at 9 million. If you go below that you're pumping dollar bills down the wellbore and we have no interest in doing that so I'd say, that's a cash threshold for gross profit per fleet.
Acquired to see us even consider activation.
And then just two quick ones here.
I know you said there their market ready to 45 fleets, but.
Again, you'll probably have some opportunities to deploy stuff I would think are we gonna see fleet reactivation costs flow through or no.
Zero I mean, the only activation costs will have is ramping up the employees 30 days in advance to getting trained up and there's a good market of employees out there today, So I would expect zero activation.
So I mean by keeping the fleet warm.
Fair enough for us.
The last one is just some simple housekeeping would you be willing to sort of offer view on depreciation DNA for 2020, and just whereas the share count.
The share count is being finalized by the accounts, but as of 11 five it was around two to 10 to 10 million on the 210, which is double the gain on SGN, a I'd assume a pre synergy run rate of 65 per quarter.
And then DNA is hard to give because we're going through purchase accounting, which will reset the DNA. So as soon as we have good numbers on that we'll share with the investment.
Well, thank you very much.
Thanks, John .
Thank you our final question comes from the line.
With Howard Weil. Please proceed with your question.
Hey, Thank you for squeezing man.
I guess Olin Ah first of all good quarter very good quarter.
Thank you Ben Thanks.
Couple of things struck me and the initial comments when Robert de stocking.
You talked about man fleet has balanced supply and demand could you. Please expand on that what what we'll let you mean by that.
Yes, good question, Vince and I think he said sometimes under estimate.
Is that once a service company takes the capacity out of the market media taken the people off of the market out of the market via layoffs or a furloughs.
It's much more of a different decision to reactivate because you don't want to be jerking people around back and forth and the cost associated with the re staffing.
Crew is not insignificant.
So there's a little bit of a balance in the market. If we take is that how many of our idle fleet do we keep hot and ready mean, the difference between hot warm being that Hot fleet has got ready ready equipment and ready people in a warm fleet has already equipment will know people and I think.
A lot of people were taken.
Action right now.
To reduce the number of crude fleets out there. So the reason for important that out as it there's a.
Pricing point associated with that people were are not going to redeploy people went to a market as gray points out the dollar bills down the wellbore. So that's the reason for pointed out and that's the difference.
Okay. So I guess linked I do have thinking is when you guys talk about 17 fleets for a legacy Keane.
What you're saying is 17 would be equal then, but there would be like 20 pretty hot stacked fleet is that the way to think about it.
No I would decide to 17 is fully loaded it may be 18, or 19 did or in the mark and the feel making jobs to make it.
The math work on 17 fully loaded and besides that we might have another one or two.
Hot and ready to take advantage of our pipeline of a sales opportunities that we are that we will risk you know a handicap accordingly so.
How you balance that flex capacity has a lot to do a profitability. If you. If you carry too much cost you profitability is going to be down.
But you you have opportunity catch upside on so that we try to be smart about that and everyday we get a try to you a little bit more information about what our pipeline looks like for a new jobs and handicap it accordingly.
Okay.
The second thing you mentioned was VIP end of lease I go on accretion and you also.
I guess, if you can talk on that and also some talk but says I'll fly it dining only hundred thousand horsepower.
Yes, a couple points. The reason we said we think we're early in an attrition cycle is because I think the horsepower. That's being served up for retirement has essentially been dead horse power on the fence that.
Now it's now its vote to announce vote to retire it so we're seeing that and the one thing I will point out as you know both companies are relatively have relatively mature fleets that we've done a a very good job of maintaining maintenance Capex and then the king side, we've been at four four and a half or for three years now and we keep the fleets fresh.
And I think there's other capex numbers out there in the market that are significantly lower but I would argue the full fleet is not being maintained right. So there's some leakage in that and that number versus versus an actual 'cause your fleets deteriorating.
As it relates to the to the horsepower I can kinda I can kind of unpack.
Unpack that a little bit so you know on the Frac fleets. We went from 2.3 to 2.2 and then we went from 50 to 45 fleets of marketed capacity Theres a few moving parts in there. The first thing we had to do a standardized the definitions of horsepower seen Jay had a definition of horsepower that was about 2000 per pound.
Whereas keen used I think what was a more common industry standard of nameplate engine capacity, which is 20 to 50 or 2500 to depending on the engine models. So the first thing we did was adjust that which actually took sanjay horsepower up 130000, our definition.
The next thing we did was increased the horsepower per fleet to deal with both the increasing service intensity as well as the need for rotational horsepower because the pumps are working so much of these efficiency level so that added.
You know a certain amount of horsepower per fleet, where were now running collectively at 49000 horsepower for fleet and that math and then 100000 horsepower effectively two horizontal fleets was permanently retire.
Yeah.
Got it Okay and one last question if I may squeezing when you talk about the 10 million.
Special Dible to restart of fleet.
When you talk about including in that like Formula enough Capex is that just a maintenance Capex said on fluid ends are you talking like well every two years you may have to Dopeless engines and transmissions and that's included in that number.
Fluid ends all go through the income statements. That's not included in Capex for Keane. What's included in that maintenance Capex number is or Sanjay. What's included in the maintenance Capex is there is the rotational refurb of key components, including engine transmission Mpower end and when you keep up with those and replace them. That's the 4 million, we've been spending to keep them.
Fleets fresh over the years. So that's a recurring number goes through the capex to keep the fleets fresh you take that plus DNA and that gets to the threshold for gross profit.
That's very helpful. Then thank you for taking my questions.
Thanks.
Gentlemen.
Ladies and gentlemen, we have reached the end of our question and answer session I'd like to turn the call back over to Mr., Robert driven for closing remarks.
Thank you very much look in closing I won't highlight a few key points first we're very pleased to have closed our merger as planned I appreciate the hard work and support provided by so many our combination has created an industry, leading us land service provider committed to delivering leading performance for customers and returns for investors.
Second we've identified more opportunities for cost savings and were increased the magnitude of expected synergies and an hicks habit and have accelerated the pace of achievement.
Third we're being responsible from an asset portfolio perspective, rationalizing a sizable portion of our combined asset base, resulting in an even stronger base of equipment I wish to execute our strategy and deliver for customers.
And fourth we remain focused on driving efficiency and safety do continued investment and innovation, our leading balance sheet position.
Comprised of essentially zero net debt and more than $700 million of total liquidity positions us to maximize the impact of our robust innovation capabilities.
We look forward to update you on our progress and performance on our first quarter call early next year.
No I also want to publicly thank all of our employees from both legacy companies for your extra effort and contributions that provide the foundations for next year.
Many have been managing extra long hours Eplus get to this point. Thank you very much and thanks to everyone. On this call for your interest in next here have a great day.
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