Q1 2020 Earnings Call

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[music].

Good day, ladies and gentlemen, and welcome to the DMC Glove <unk> first quarter 2020 earnings conference call. All lines have been placed an all listen only mode. In the floor will be opened for your questions and comments following the presentation.

At this time it is my pleasure to turn the floor, but your host for today Mr., Jeff Hi, VP of Investor Relations, Sir the floor is yours.

[music] and welcome to DMC his first quarter conference call presenting today, our president and CEO Kinda long and CFO My queued up.

I'd like to remind everyone that matters discussed during this call may include forward looking statements that are based on our estimates projections on assumptions as of today's date.

There are subject to risks and uncertainties that are disclosed in our filings with the FCC.

Our business is subject to certain risks that could cause actual results to differ materially from those anticipated in our forward looking statements.

She assumes no obligation to update forward looking statements have become a true because of subsequent events.

A webcast replay of todays call will be available at the M.C. Global Dot com. After the call. In addition, a telephone replay will be available approximately two hours after the call.

Deals for listening to the replay are available in today's news release and with that I'll now turn the call over to Kevin Kevin.

Thank you John.

Everyone DMT is core energy market entered a very challenging period during the first quarter.

Oil and gas demand cloud as it tends to slow the cold 19 pandemic sharply curtailed global economic activity.

These difficulties were compounded by rapidly rising crude supplies and declining storage capacity.

Supply demand imbalance led to a 65% drop in oil prices during the first quarter.

This price decline accelerated in the second quarter.

Earlier this week U.S. crude futures fell by more than 300% in a single day and turned negative for the first time in history.

DMT is taking steps to withstand this downturn.

We have a highly efficient operating structure, a strong financial position in a compelling business strategy.

Following a review of our first quarter financial results I will summarize a number of actions we have taken to align our cost structure.

Lower activity levels.

Consolidated sales for the first quarter were $73.6 million.

15% sequentially, it down 27% versus the 2019 first quarter.

Dynaenergetics, our oilfield products business.

Reported first quarter sales at $53.2 million down, 18% sequentially and 33% versus last year's first quarter.

The decline.

Which was trending down throughout the quarter and then fell sharply in March.

So that no platter composite metals business were $20.3 million down, 7% sequentially and flat versus last year's first quarter.

Consolidated gross margin into first quarter was 33% down from 35% in last year's fourth quarter and down from 36% in the 2019 first quarter.

The decrease reflects the impact of lower body about fixed manufacturing overhead is dynaenergetics.

As well as a less favorable project mix and noble class.

The lower proportion of sales at dine energetics versus.

Dan Energetics reported first quarter gross margin of 37%.

<unk>, 38% in the 2019 fourth quarter and 39% in.

In last year's first quarter.

No. It's five reported first quarter gross margin of 25% versus 27% in the fourth quarter.

And 26% in the year ago first quarter.

We reported consolidated adjusted operating income of $7.5 million, which includes an increased $2.3 million to our reserve for doubtful accounts, but excludes $1.1 million in restructuring charges.

The restructuring charges, primarily related to severance expenses associated with the workforce reduction.

Adjusted operating income that 2019 first quarter was $20.5 million.

First quarter adjusted net income was $5.3 million.

35 cents per diluted share.

First as adjusted net income a $15.2 million or a dollar two cents per diluted share in last year's first quarter.

Adjusted EBITDA was $11.3 million versus $17.6 million in the fourth quarter and $23.9 million than last year's first quarter.

Dining or Jack's reported first quarter adjusted EBITDA $11.3 million.

Well no cloud reported adjusted EBITDA of $2.4 million.

As first quarter customer demand declined.

We moved quickly to reduce our activity based cost structure.

Initiatives included the difficult process of reducing our workforce by approximately one third.

It's primarily affected direct labor positions that dynamic products, where we also implemented shortened work weeks at our manufacturing facilities.

Selling general and administrative expenses have been reduced by 25% versus our 2019 quarterly run rate.

We have to cut our 2020 capital budget by 50% we.

We now anticipate capital spending of approximately $13 million.

Which will be focused primarily on maintenance programs.

We have also suspended our quarterly dividend.

These initiatives are key to maintaining our financial strength.

As we navigate a challenging time for the economy.

In our industry in particular.

These steps also will enable the continued execution of our medium to longer term business strategy.

Which is great values through investments in research and development product to market development.

Digital transformation and operational excellence.

The expanding product offering it dining our Jack's continues to improve the safety efficiency reliability unconventional wall completions.

Exploration and production companies and their service providers are abandoning the updated process assembling and hand wiring rudimentary components and if transition to our Donda stage DS factory assemble performance assure perforating systems.

D.S. systems are delivered directly to the well site, reducing the need for assembly personnel and related.

Facilities.

They also reduce our customers investments in inventory supply chain resources, and working capital and significantly improve their returns on invested capital.

No the clad.

$29 million.

Orders during the first quarter, making it the second strongest bookings quarter in five years.

Well the class Rolling 12 month bookings were 98 million.

Hours approaching $90 million at the end of 2019.

Order backlog at the end of the quarter was $41.3 million, a 30% sequential improvement.

The economic downturn hit severely disrupted our core energy markets.

Operators and service companies are revisiting their activity plans daily.

We anticipate second quarter, well completions could be down by more than 60% year over year.

This volatility has made it very difficult to forecast our near term performance.

And we therefore, not able to issue financial guidance for the second quarter for full year.

Despite these challenges DMC is well positioned for long term success.

We have taken aggressive action to maintain our liquidity and reduce costs, which will enable us to continue our investments in new technology product and market developing.

I can currently focusing on innovation and financial strength.

We are confident DMC will emerge from the downturn and even stronger company.

I'll now turn the call over to Mike for a few comments on our expenses and balance sheet Mike.

Thanks, Kevin looking at our first quarter expenses consolidated as DNA was $16.6 million were 23% of sales versus SGN is $15.5 million was 15% of sales in last year's first quarter.

As Kevin noted earlier this year as first quarter included a 2.3 million dollar increase to our allowance for doubtful accounts.

As a result of our cost cutting initiatives, we expect SDMA will be approximately $12 million during the second quarter.

First quarter amortization expense was $354000 or less than 1% of sales.

We ended the first quarter with net cash of $2.9 million as compared with net cash of $6.1 million at December 31, 2019.

Cash and cash equivalents at the ended the quarter were $16.5 million.

Total debt at March 31st was $13.5 million in our debt to adjusted EBITDA leverage ratio was your point too.

With that we are ready to take any questions operator.

Thank you, ladies and gentlemen, if you have a question or comment it a star one on your telephone keypad at this time.

Again star one for any questions see for using a speaker phone, we ask that will pose your question you pick up your handset provide the best sound quality.

Well go first to Tommy Mall, it's Steven.

Good afternoon, and thanks for taking my question.

Yeah, good afternoon Tommy.

Kevin last downturn, one of the things that distinguish the AMC global was you lean Dan.

And I'm really invested and in the pre assembled gun system that has subsequently taken so much market share.

For this downturn.

It just started you identified a few different buckets technology products market development.

As areas, where you still plan to invest.

What can you tell us about the the priorities that remain.

As of today, what's still on the calendar for 2020 in those areas.

Yes.

Good question Tommy.

We have not caught.

At all our investment in technology product or market development.

Those are longer term programs.

With with longer term.

Goals and hopefully and results.

And we moved swiftly over the last month to make an adjustment in our activity based costs.

However, the structure of our company is we've worked on for the last five to seven years.

So we feel that we're well positioned actually better positioned in this downturn.

Than we were in 15 16.

To continue those investments we do think this downturn is going to be more severe.

What happened over a 15 and 16 seems to be taking place.

Over a month or two [laughter]. So it is we're seeing a significant decline in activity, but we don't expect the activity just stay at these levels on a medium to longer term basis, and so were our strategy is not changed one bit.

And just to make sure I'm following Kevin that would include some of the new product development you guys talked about.

Last quarter I believe in terms of the tools adjacent to your.

Pretty simple is that correct.

Yes, correct or Tommy we've expanded the product line in the in the pre assembled gun to to have several additional configurations, we're actually shipping for trials or this quarter.

Our echo, which is a re frac product line.

And and we've continued with.

The development of.

Ballistic release tool in a setting tool.

Which were currently in the I.P. phase so.

Those product lines and so we were not.

We're not slowing down one bit on those items.

Okay, good to hear in that but.

Clarifies a lot.

Shifting to your shareholder letter Kevin one of the themes you highlighted recently was if you look at the company last cycle.

You had 25 manufacturing and distribution facilities around the world that's not down to eight.

So clearly this time around the the company looks a lot different and there's a lot meter in terms of fixed cost structure.

If we apply that specifically to dynaenergetics.

And we look at last downturn versus where we might had this downturn last time around.

We ended up and I'm, specifically looking at 2016.

Basically at breakeven.

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People to manage the business Oh that Todd is there a reason.

In the context, where.

It's perfectly I understood you can't give specific guidance given that completion, maybe down 60 plus percent year over year, but but is there a reason just high level to think this time around you can manage to.

A larger EBITDA margin, there's there's an ability to do that where do you think the last trough. That's a good precedent forced to look good.

Yes, Tommy this is Mike.

I think that.

I think you're heading into right direction. When you look at that trough, we were EBITDA breakeven I think we can.

In this environment environment, the EBITDA positive.

Port for Dynaenergetics.

Okay.

All right that's all for me. Thank you.

Mhm.

Well go next to George O'leary Tudor Pickering Holt.

That's right.

Good afternoon George.

And then very disciplined on price and it's understandable I just given.

The industry structurally you operate in the competitive landscape and the superior product offering.

But in an environment like this there invariably going to be pricing pressure just strategically how do you deal with that and then.

Hi, My thoughts somewhat how do you think about.

I don't personally system sales in most markets, where some of your customers.

Looking to go back just trying to buy component that's drop.

Let.

We try to be cheaper the one price you won't see we just customer behavior or are they trying to dumbed down just to say any that fine even if it's not net savings across.

Cycle.

Yes.

George we are seeing.

Increased.

Price competition lower prices on components.

Yes, and also if you will have dumbing down of the perforating system.

Somewhat going back to two technology back in the.

Before 15 16.

We have chosen not to chase that type of business or that kind of.

Activity.

Safety risks are increasing or.

Excuse me the safety is decreasing when they move back and technology.

But also there is theres greater Miss runs.

And and more nonproductive time, and a lot more.

Activity tied up with our customers and managing the supply chain and inventory of working capital.

And what we see happening is more about.

Short term.

Scrambling by companies too.

To stay active.

And ER and it's not sustainable it's it's not sustainable because its higher cost lower performance and increased risk.

And at the.

Dynasties system.

It does.

Sell at a premium over.

The components, but it also offers a significant value to our customers.

Uh huh.

Seven to 10 fold the cost premium in lowering the cost of completions on a well.

And the the smarter companies are focused more on.

The value in U.S, rather than the purchase price cost.

And and so we've seen.

Some low price prices out there, we we believe we probably lost some share to component manufacturers.

In the first quarter.

And we're fine with that is not sustainable on a medium to long term basis for those companies, they're not making money and they're certainly not adding value to their customers and so we're staying focused on our strategy of providing the most innovative saved us.

And and the best performing systems in the marketplace.

We we had.

Two largely in peace tell us that.

That our failure rate is.

So much less than our competition.

One in 6400 systems.

Where others are.

Seven to 10 times greater than that.

They are more than make up through the life of the well.

The cost of our done.

And so is.

We're focused on companies that are looking to to be here.

235 years down the road and focus on value.

No that's good to hear and then.

Tommy hit on that technology question. Good day here you guys are still very focused on the plan little often there just given the balance sheet Division you guys are and having a strong balance sheet are there other ways you think about gone on offense inorganic growth.

All being contemplated that money that M&A landscape look like.

I'm just curious about other ways you can try to go on offense given your much better positioned than most from a balance sheet and from an equity price I couldn't valuation perspective.

Yeah we're.

Laser focus.

On our customers our products.

And the markets that were currently serving.

We don't feel.

Not yet that it's time to venture.

After that.

Got it and then.

Just one more if I could you mentioned the year over year down.

8% and that's certainly helpful color just curious brand.

The pace at which revenue starting to fall off in the March timeframe and how that's trended as we progress and to you call I realize the Crystal ball is very cardium and make prediction beyond that is.

<unk> million in discussions are changing daily, but it's kind of frame how things progressed through the corridor.

Q4, Q1, sorry, and then as we got into April.

Well you've seen so far.

Yeah, we saw first of all.

January and February were reasonably strong months for us.

Well, we saw pick up compared to the fourth quarter run rate.

But then it.

After in March it drops.

35% to 40% from what that run rate was in.

January February.

And it's drop further if you will.

Into April.

And so literally we saw.

15, 16, the market to two years to drop to the level that we think that April it's going to be.

Compared to the prior year. It took 45 days this time around.

That's.

Very helpful frame and thank you very much Kevin.

You're welcome George.

Well go next to Stephen Gengaro at Stifel.

Thanks, Good afternoon.

Oh, yes.

I guess, hi, Kevin I guess I'd start with when we think about the what you're doing from a capex perspective working capital.

How do we how do you expect free cash flow.

Fold, knowing we don't know what the operating results you're going to be but if you look at working capital drawdowns, possibly one of the puts and takes we should we thinking about from free cash flow perspective.

Okay, Mike you want to go ahead.

Yes, Hi, Stephen.

When we think about free cash flow for the for the second quarter.

It's going to be very.

Challenging.

Probably operating in that sort of.

Breakeven.

From a net debt net cash.

Standpoint, maybe slightly negative.

From a capex on thinking about that 13 million for the full year 5 million in the first quarter, probably with previously committed projects three to 4 million in the second quarter than it is going to taper off quite a bit in the third.

You know in fourth quarter as far as working capital I.

I think we're not going to see a lot of that come through in the in the second quarter. If you think about March the onset of decoded 19 pandemic.

In Asia Pacific, We started building some some inventories early in the.

Early in the in the quarter and then.

So we with the lower volumes were gonna have to burn those inventories down over the next couple of quarters. So you know we see you know cash flow positive, but that's the end and quite a bit of working capital bring down on the inventory side, but that's going to probably happened in the third.

In fourth quarter, which will.

Protect our.

Revolver and preserve our liquidity.

Thank you.

Well, we think about me.

Sure.

Your technology are delivering to the oil field.

The pricing in the plan in place and usually you have God.

What is one of the customer discussions like if you step you've been able to have many given how fast things have fallen.

Do they give a look.

Less willing to buy into the value proposition you delivered a premium price.

When things are falling already or do you think ultimately they actually benefit from it. So it helps to I know you mentioned, maybe losing a little shared a components even short term, but how do you think that unfolds over is over the next few quarters.

Okay.

Well ill compare and contrast that back to 15 16, because 15 16, we were introducing the product in the business model.

And.

Yeah, I think our 2019 performance best indicates that.

The the business strategy and the product.

Is winning.

And in this this.

Downturn.

It actually.

I it reduces the number of people at a well site when they are completed.

And it significantly reduces.

Working capital supply chain resources operating resources.

And and and you get an improvement in performance for.

Lowering the cost.

So the service quality goes up and so we're seeing.

I, we're seeing a.

Discussions that are that are really centered around.

A partnership rather than a transactional cost.

On a project by project basis, where people are really focused on.

Moving towards our system, but doing it in a way that sustainable on a long term basis, so that they can.

Really experience the cost savings of getting rid of their investments in assembling guns, and that's a service level the value proposition at the.

At the ERP in terms of oil recovery and other things.

It's it's still very sound, it's at a lower.

Price per barrel is it comes down but it's still.

Far exceeds the value of the product and ultimately the delivered product or.

Deployed product in the well.

Okay, great. Thank you and I just one final me.

When we when we think about I guess, it's maybe a one off it's got a two part question, but when you when you think about.

The well completion activity or frac stages, probably want to sort of frame the market, but when you think about that decline were likely to see in the next quarter too.

Do you think you perform you run your wherever you are down energize performs similar to that level of activity decline and how should we think about the gross margin.

Levels, what do you think we lose a couple hundred basis points next quarter, how what do you think that goes.

Okay, I think and it's kind of interesting because there is a very confusing time in the marketplace and there's a lot of.

But he is scrambling to.

Consume inventory and and focused as I was saying earlier.

On on a media cost.

Versus performance and that's kind of flushing itself through.

We believe it's going to flush itself true in the second quarter, maybe a little bit ended the third depending on activity.

So.

We see our share.

Maybe in the in the very near term weeks and months.

Holding.

And so we're going to follow the decline in Oh, well completion activity, but we expect as the markets stabilize.

Before they start growing again.

You know, there's going to be a fair amount of attrition in the industry, probably some consolidation fewer people.

And and our solution that is.

On the factory assembled.

Part of it and the performance assured part of it and what it does too.

Lowering.

Personnel and cost is going to.

Being a stronger position as the market stabilize and they start to come out of that probably at the ended the year or and and into the.

First and second quarter next year.

And Steve and on the on the margin question you know, we're going to see significant under absorption in the second quarter is just going to be very.

Very unusual time it over.

During the recovery in over the longer term, we expect to see.

You know similar.

Incremental margins on the recovery side as we've as we've seen in the past.

And our.

Our variable margin is.

In the 45 to 50 plus percent range on this product line.

And so.

As the as the market struggles in the second and third quarter, you're going to.

See probably similar.

Decremental kind of margins.

Great. Thank you Brian I appreciate it.

Okay.

Well go next to Jerry Sweeney Roth capital.

Hey, good afternoon, Kevin Mike and Jeff Thanks for taking my call.

Yes, Hi, Jerry.

Let's talk a little bit about strategy I mean, obviously next couple of quarters very difficult. Obviously, I think we're going to see some shake out of players.

In this space and I think you've even mentioned this on previous calls part of your strategy was to what I'll call is get closer to some.

Good balance sheets, but I think youre. It previously same getting closer to maybe the.

Eventual winners the bigger players in the space et cetera.

Does this shake out.

Give you an opportunity.

To realign ourselves really go after that strategy.

The last downturn, you talked about R&D people leaning into R&D and separate yourself from the pack is this an opportunity to maybe lean and gets back then with some of the big players and really tried market share.

You know we first of all we have.

We have some very good competitors.

And and.

And we would expect that.

The stronger companies coming out of the market versus going in or couldn't be more system focused in value focused versus.

Price focused.

And.

And in initial cost focus.

So so I don't want to ever underestimate our competitors I mean, they're very very good.

We we just it's not so much that we're leaning into our strategy, we're not leaning out or that we're staying in it.

And.

And we feel that the focus on.

Creating value for customers in deploying our product.

More focus on innovation and system integration.

In a market that is.

In a sees some attrition probably on the component and a bit.

That that we're just we're going to we have a better value proposition.

And so we were staying focused on that and we think that will come out a bit stronger.

And there's going to be it's just it's.

Necessary for some of the capacity to come out of.

The industry.

Yes, so that there was also good.

Oh go forward.

Return on investment.

For the companies that.

That can stay strong through this downturn.

Come out the other side.

And and.

And so we're just.

We're not deviating one debt from our longer term strategy and and we expect there to be.

Fewer stronger larger.

We're integrating companies going forward.

We hope to be either Prober preferred supplier perforating systems.

Got it.

Just maybe could opportunity to maybe stuff off the questions from the class.

And.

The last downturn, there were strategic and helping you hey position.

Obviously really good bookings in the quarter, it's a very long cycle business.

Two questions on this front or maybe.

Have you stress tested your backlog.

Obviously, it is long cycle business, but I'm not sure if there's any shorter term business and projects in there and then.

What does the gross margin profile look like in the backlog.

Noble class.

Okay, we look at it more from a contribution margin standpoint in terms of the backlog.

And and the contribution margins as I mentioned earlier for out.

Dynaenergetics or in the 50% range or.

No class there 43, 44%.

And.

Yes.

Their backlogs.

Has is a good margin backlog.

It is.

Stress test if you will and we expected to the revenues to pick up in the second half of this year as we begin shipping part of that backlog.

I will say that and talking with the salespeople in some of the customers in that market we.

They're not going to excuse me if you will maybe some larger projects starting.

But that's going to be later in the year in and maybe into next year, but then on the same handers theres a lot more everyday business maintenance business happening in this type of market that we think is offsetting.

Anything that may get pushed into next year.

Got it that's it for me I appreciate it thank you.

Okay.

Once again it was star one if you had a question or comment that a star one on your telephone keypad well go next to Edward Marshall at Sidoti and company.

Hey, guys how are you Kevin Michael Jeff.

I hope everyone is doing well families are safe.

Sure.

Yes, I think you for that as you yeah.

Yeah Yeah.

Good times right.

Okay.

I cannot stay on mobile cloud for a second and I guess, you know going back to the shareholder letter you talked about new market opportunities you mentioned solar in particular, but you've seen some revenue and we know about that but well if we could dig into bid deeper and help us kind of understand maybe the bookings and what might be driving the bookings and backlog.

How much of that as legacy versus kind of new projects that you, maybe our new markets two avenues to market that you maybe kind of uncovering that'd be helpful.

Yeah, I mean is strictly we would say that.

Petrochemical downstream oil and gas and the chemical industry would be.

70 closer to 80% of.

Of that business.

It's about 65% in the in the current backlog and bookings trailing.

12 month bookings.

So we're seeing a growth in metals and mining.

Power generation.

Marine.

Industrial refrigeration and then some unique applications like.

This would have products manufacturing that we're getting involved with and so those new applications are just beginning and.

And they're really what we're seeing as part of the pickup in their revenues for this year.

And could you define or redefine maybe what the market for noble Clyde could be looking at these new business ventures that or new business markets that you might be kind of targeting what the scope of what the the scale of your pets or scope of the business could be and for the market.

Overall.

Yes, I think were.

Yes, it's.

Noble Clyde is as you mentioned earlier as a.

Kind of long long cycle business.

And getting involved on the.

The process and of.

Designing the infrastructure for these applications.

It takes some time in so.

We're seeing.

Success right now I'm I'm projects that we've been working on for well over a year.

And I.

I think it's still too early this to say what is it.

Whether that's changed the size of the market on a longer term basis, we believe it has.

But I I.

Till we start seeing repetitive orders in some of these markets. It would be too early for us to forecast and say that this is a sustainable change in market size.

Got it and entering the dressings, because you have addressing specific the sip specific.

New applications are these kind of taking share from maybe some of the rolling mills or taking it from some of the welding companies just trying to get a sense as to how that development is working.

Now there are there new applications altogether in the which is.

We like because it's it's really.

People, recognizing the value our value proposition for those composite metals.

Got it.

Just following up on the previous questions you talked about the last downturn in and I think you you and I've had the conversation before that.

About 2015 16 that the the ex.

The boom in your business no pun intended and 18 and 19 would never have happened 17, 18, 19. So we're kinda answering that downturn I'm kind of curious about how you're targeting market share I'm wondering you kind of a talked about it just some like the already what am I want to ask specifically or are you focusing on market share from wireline.

Suppliers customers from me on the MP or maybe some of the largest service providers that are out there that might actually compete when asking that question directly where where's your target.

Well, we're we're.

We're focused on on completions and that.

Mean, serving both the E P and the surface companies. So it is.

Nothing has changed there and and where we don't have.

A market share goal, if you well what we have as we focus on the technology products and getting these products into market.

And letting the value driver.

The the volume in the applications.

And and so we.

We focus more on the process to get to the market share than the market share itself.

And.

It.

We also focused on maintaining a healthy.

Margin for our products. So that we will we create their margin by creating value for customers.

And we're not locked into trying to hold on to share for sake of price.

And.

And so it's really about the value that we create and the value that we can earn four.

Our employees and our shareholders.

I guess you have some large service providers that that offer some similar products that you offered obviously, there's a there's a value opportunity.

Look at someone like to source from someone like DMC and has the pie get smaller I'm wondering how long they can justify kind of carrying those types of is that something that that.

Got you you've kind of spent some time on or maybe hats disco I know this is a question that came up to the last downturn.

Maybe a took off too fast and you are unable to kind of complete some of the initiatives that you're working on I'm wondering if that if the current downturn brings those kinda back to the surface and potential for for new opportunities as well.

Well I think that.

You know companies each have a unique value add and our value add is.

Integrated Perforating systems factory assembled.

Deploying that technology that is incorporated in our products.

And and we feel that we can do that more efficiently than than most.

And and we've also.

We have invested in that technology and product development.

That.

Some of the other companies may have.

Gotten away from over the years and so.

Yes.

Two.

To get the efficiency out of.

The manufacturing.

And the technology into the products.

Some of these other companies are going to have to make investments in a downturn.

Which is much more difficult to do and we have a strong technology position.

And so at some point.

And I'm not talking about our most immediate competitors, but.

Some of the service companies smaller to larger.

They have to ask themselves whether.

Being vertically integrated in the assembly components that they make.

Don't make make sense.

And that's kind of hard in a in a market that's under.

Stress.

I appreciate thats what else that's sir.

So I was looking for that's what I was looking for.

If I look at the doubtful accounts, just just I'll touch on that for a second the 2.3 about it looks like three and a half 4% of.

Of your receivables there.

Is that one particular customers a series of customers just how how be kind of round that out say Anne and then ultimately.

I think about the in the remainder of your collections as you kind of move forward. So the next day 60 to 90 days.

Yeah, we.

And this is Mike we just wanted to go get out in front.

And increase our reserves to ensure were.

We're covered from.

Potential a our bad debt standpoint, so more more more general reserves.

No.

Across.

Maybe more a few few customers.

And so you've seen receivables from 60 to say 90 days or have you seen it you know even further as that is that kind of starting to happen now as it already happened just trying to get a sense as to kind of how you're looking at that.

We've seen a move out a little bit we've we've seen on.

No doubt.

A dead, but a lot of our customers are are keeping within their terms.

But maybe pushing out just a bit.

Okay. Thanks, guys. Thanks, very much appreciate it stay stay safety well.

Yes, Thank you Ed.

I will return to Stephen Gengaro at Stifel.

Hi, Thanks, one more if you don't mind gentlemen, so given how rapidly this this.

Drop off in U.S., well completions is hitting us I just want to make sure I understand it struck me.

Any level of inventory of your product that's kind of in the channel in the hands of the customer that would sort of slow or delay up a recovery or change the way you business reaction as activity.

I think sublease luggage.

Yes, I mean, we have.

I mean, there's there's there's a couple of customers said that.

But based on activity that.

It says, but those projects have been canceled or change that they've looked at us and said Hey can you help us.

And.

But there is.

In itself is if it's new or recent inventory.

Yeah, we would help those customers.

If it's older inventory the answer is no I mean, we had a little bit of that in the first quarter.

But one of the value propositions that we.

That we made for our customers is that that they don't have to maintain inventory.

This is just in time.

And so and we designed our manufacturing facilities to two yes, if we get an order today that we could ship it by the end of the weak and and that ability to respond.

It is taken and significantly reduce the inventory of.

The service companies that we do business with that are taking advantage of that model.

And so there's a couple that have bought into inventory or.

But that's.

And we don't view that is significant because of the response that we built in to our supply.

Our supply chain.

Great. Thank you.

Mhm.

And with no other questions holding I'll now turn the conference back to Mr. long period closing remarks.

Yes.

Greatly appreciate the interest that that.

You all have been in our company and I want to highlight and thank our employees through this very difficult time.

On their continued focus on innovation in their efforts.

To to make us a strong company there was a concurrent responsibility in our end to to be a responsible employer, which we will do.

And and everybody. Please stay safe and we look forward to talking with you after the.

Ended the second quarter.

Thank you.

Ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time and have a great day.

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