Q2 2020 McGrath RentCorp Earnings Call
Ladies and gentlemen, thank you for standing by.
Welcome to the Mcgrath Rentcorp second quarter 2020 conference call.
At this time all conference participants are in listen only mode. Later, we will conduct a question and answer session.
If you have a question you wouldn't be depressed Starkey followed by the one key on your telephone. This conference call is being recorded today Wednesday July 29 2020.
Before we begin no matter the matters the company management will be discussing today that are not not statements of historical facts are forward looking statements within the meaning of the private security Litigation Reform Act.
1995, including statements regarding our third quarter 2020 financial outlook as well as statements relating to the company's expectation.
Brad to geez.
Prospects or targets. These forward looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected.
Furthermore, it should be noted that the impact of the covert 19 pandemic continues to evolve as such the full magnitude. The pandemic will have on the Companys financial conditions liquidity and future results of operations is uncertain.
The following discussion by management about the Companys financial condition is subject to the future effects of the covert 19 pandemic.
In addition to the Covidien 19 pandemic important factors that could cause actual results to differ materially from the company's expectation are disclosed under risk factors and the company's form 10-K, and other FCC filings.
Forward looking statements there.
Forward looking statements are made only as of the date hereof.
Except as otherwise where by law, we assume no obligation to update any forward looking statements. In addition to the press release issued today. The company also filed with the FCC the earnings release, well form 8-K and form 10-Q.
Speaking today will be Johannes Chief Executive Officer, and Keys, Pratt Chief Financial Officer, I'll now turn the call over to Mr. Hannah go ahead Sir.
Thank you Catherine.
Good afternoon, and thank you for joining us on today's call I will start the call with some overall remarks and comment on our second quarter 2020 performance and are looking ahead, Keith will provide additional detail in his financial review and outlook comments.
The second quarter brought with it unprecedented and challenging conditions for us to navigate through which we were able to deliver adjusted EBITDA growth of 11%.
The covert 19 pandemic resulted in some customer project work stopping and that's starting.
Our workforce transition to new safety and operating protocols myriad additional federal state and local guidelines to follow and uncertainty at every turn.
Nevertheless, we adapted quickly and delivered good results.
Everyone in the company's stepped up and put our customers first preparing delivering and returning equipment throughout the quarter without missing a beat.
Overall, our workforce remains safe and healthy during the quarter.
Here are some of the highlights.
Mobile modular rental revenues grew 4%.
During the quarter most of our education projects progressed on schedule and without significant disruptions.
Some school districts were able to accelerate schedules due to empty campuses.
We closed out a number of education classroom sale projects.
Mobile modular and Enviroplex, which contributed to our strong quarterly profits.
In our commercial end markets. Despite some project shutdowns earlier in the quarter areas open back up and project resumed.
Our portable storage business grew rental revenues, 3%, although we noted softer demand for new projects during the quarter.
[music].
Turning to Trs Rentelco, we grew rental revenues 2%.
Despite business disruption from covert 19 bookings steadily increase during the second quarter as project work gradually resumed.
Most of the demand weakness was in our communication sleep as many contractors and field personnel that use our equipment stopped working.
Over the course of the corner as these contractors returned to field work he began to place rental orders again.
Rental revenue growth in the quarter came from our general purpose customers with relatively healthy demand as projects in aerospace and defense and semiconductors continued.
Adler rental revenues decreased 27%.
Kobin related economic disruptions in the drop in the price of oil and gas from both global overproduction and lack of demand slowed rental activity as projects were cancelled or pushed out.
We saw a decrease in five of our six industry sectors during the second quarter.
Downstream refining capacity utilization decreased the all time lows.
Rig counts dropped in the quarter as drilling operations were curtailed.
Overall, a tough quarter for the business as both a pandemic and the price of oil generated headwinds for rental revenues.
Despite these headwinds the business generated healthy cash flow for the enterprise.
In looking at the demand picture for the rest of the year much depends on our ability as a nation to get the Corona virus under control.
Barring more significant impact from the pandemic at mobile modular we're not expecting pride project disruptions in education as customers have remained steadfast in their plans and commercially we are seeing more stable conditions, the weaker than a year ago.
Our pipeline remains strong and Enviroplex, we're expecting to close out the year with projects as planned.
At Trs Rentelco, we're hopeful that Fiveg field work will pick up during the second half of the year end demand for our general purpose equipment will remain steady.
At Adler, we're not expecting much uptick in rental activity until oil and gas demand improves.
We are hopeful that we have troughed at Adler, but we expect market conditions will remain soft in that business for the foreseeable future.
It is important to know what we accomplished in the quarter and our ability to weather economic storms I'm proud of our execution as we navigated an unforeseen an unprecedented economic shutdown and operated effectively.
We are fortunate to have the experienced leadership and employee base that we do.
There are professional instincts and solid relationships were vitally important as we made necessary adjustments to support our customers many of whom have been loyal for years.
In addition, our business demonstrated its resilience in challenging times as our strong cash flow generation enabled us to pay an increased dividend.
Repurchase stock and reduce debt.
Finally, we delivered improved profitability on a year over year basis, Despite one of our divisions experiencing significant headwinds.
As most are aware in today's business environment access to capital has become more challenging for some companies.
And going forward it may be more difficult.
In these situations renting equipment becomes an even more attractive alternative when reduced capital budgets preclude new equipment purchases.
Mcgrath Rentcorp is well positioned to supply our customers and markets.
Despite an uncertain economic backdrop, we're hopeful that conditions will improve as the remainder of 2020 unfolds.
Now, let me turn the call over to Keith who will take you through our financial review.
Thank you Joe.
Picking up on Joe's comment.
Since the Cobot 19 pandemic began our teams have done a great job in moving quickly to adapt to the new operating norms.
They did all the while also delivering good second quarter result.
For the second quarter of 2022.
Total revenues increased 8% to 137.7 million.
From 127.4 million a year ago.
The company, 12% operating profit increase for the quarter, we've driven by a 5.1 million increase in gross profit from sales revenues.
Partially offset by 8.8 million and point Sevenmillion decrease.
Gross profit on the rental revenues.
Rental related services revenues, respectively.
Net income increased 16% to 22.5 million from 19.5 million.
And earnings per diluted share increased 16% to 92 cents from 79 cents.
No I will briefly results dawn by reviewing rental division operating results and performance compared to the second quarter of 2019.
Mobile modular total revenues increased 9 million.
Or 13% to 76.8 million.
On higher sales and rental revenues.
Partially offset by lower rental related services revenues.
Rental revenues for the quarter increased 4% from a year ago.
Which was driven by 3% higher average equipment on rent.
2% improvement in average monthly rental rate.
Sales revenues more than doubled to <unk> point, sixmillion, primarily on higher new equipment failed to educational customers.
We achieved rental revenue growth across our commercial and education markets as well as in our portable storage business. Despite the softer business conditions that Joe described.
Equipment preparation costs.
Prudent in other direct cost of rental operations decreased 13% to 12.4 million.
Due in part to lower shipment activity levels during the quarter.
As a result rental margins increased to 61% from 56%.
Average modular rental equipment for the quarter with 823 million, which was an increase of 36 million.
Average fleet utilization for the second quarter decreased to 77.7%.
From 79.2%.
At Trs Rentelco.
Total revenues increased <unk> million for 2% to 33.1 million.
On higher sales and rental revenues, partially offset by lower rental related services revenues.
Rental revenues for the quarter increased 2%.
Primarily driven by <unk> percent higher average equipment on rent.
Which was partly offset by 6% lower average monthly rental rate.
The lower average rental rates reflect a mix shift towards more general purpose equipment rentals that tend to have longer term transactions compared to communications equipment rentals.
Rental margins decreased to 41% from 44%.
We saw growth in rental revenues from general purpose test equipment.
Partly offset by lower revenues from communications test equipment customers.
Average electronics rental equipment for the quarter with 339 million.
Which was an increase of 42 million.
Average utilization for the second quarter decreased to 63.9% from 67.2%.
At Adler tank rentals.
Total revenues decreased 7.7 million or 29% to 18.6 million.
The lower rental.
Rental related services.
And sales revenues.
Rental revenues for the quarter decreased 27%.
Primarily from 23% lower average equipment on rent.
And 6% lower average monthly rental rates.
The rental revenue decrease reflected weaker demand caused by cobot 19 related business disruptions.
The lower price of oil and gas.
With five of our six and markets, having lower rental revenues compared to last year's second quarter.
Rental margins decreased to 51%.
58%.
Adler average rental equipment for the quarter with 315 million.
Which was an increase of 1 million.
Average utilization for the second quarter decreased to 44.3%.
57.5%.
Moving on the remainder of my comments will be on a total company basis.
Total company equipment sales revenues increased to 30.7 million from 13.7 million a year ago.
This increase was due to higher sales revenues at mobile modular and Enviroplex.
Reflecting strong demand for education projects.
The timing of sales revenues can fluctuate from quarter to quarter and year to year, depending on customer requirements availability of used equipment for sale and other factors.
With a significant number of sales project already completed during the second quarter.
We currently expect total company sales revenues for the third quarter to be lower than a year ago.
And total full year sales to be comparable to 2019.
Selling and administrative expenses decreased point, threemillion or 1% to 30.5 million.
Primarily due to lower travel and meeting costs.
Interest expense was 2.2 million a decrease of 30%.
As a result of 28% lower average interest rates and 3% lower average debt level.
The second quarter provision for income taxes.
With based on an effective tax rate of 26.4%.
Compared to 24.9% a year earlier.
Our two 520 year to date cash flow highlights include.
Net cash provided by operating activities.
It was 97.5 million, an increase of 5.5 million compared to 2019.
The higher cash flows supported organic investment into business.
Increased dividend payment and share repurchases.
While also reducing debt.
The strong cash flow characteristics demonstrate the company's resilient model during a period of economic weakness.
We invested 57.6 million for rental equipment purchases, mostly Trs rentelco and mobile modular.
And 6.9 million for property plant and equipment purchases.
Hartley offsetting these investments was 21.9 million of proceeds from sales of used rental equipment.
Dividend payments to shareholders were 19.5 million.
The company repurchased 280000 shares of common stock totaling 13.5 million or an average price of $48.24 per share.
There were no repurchases of common stock during 2019.
Net borrowings decreased 21.3 million to 272.1 million during the first half of 2020.
At quarter end, the company had capacity to borrow an additional 259.4 million under its lines of credit.
And they're issue of funded debt to the last 12 month actual adjusted EBITDA.
With 1.1.
Two one.
Second quarter, two 520, adjusted EBITDA increased 11% to 58.1 million compared to a year ago.
And consolidated adjusted EBITDA margin was 42% compared to 41% a year ago.
Our definition of adjusted EBITDA.
And a reconciliation of adjusted EBITDA to net income are included in the quarters press release.
Finally, turning to our financial outlook.
For the third quarter, two thoughts and been 20, we expect.
Total revenue between 140 and 160 million.
Adjusted EBITDA.
Between 54 and 64 million.
Gross rental equipment, the capital expenditures between 10 and 15 million.
Please keep in mind the following regarding our outlook.
The impact of covert 19 on the economy and on our business is evolving and it's difficult to assess.
In addition visibility is limited at Adler tank rentals, and Trs Rentelco because of the short rental terms in both businesses.
That concludes the prepared remarks, Katherine you may know open the lines for questions.
Thank you.
A reminder to ask a question you'll need to press star one on your telephone.
Draw your question press the pound key.
Again that star one to ask a question.
And our first question comes from Scott Schneeberger with Oppenheimer. Your line is open.
Thanks, very much good afternoon.
Yeah.
The I guess I might just started in the a in the modular segment, we and can we address the sales what what do you attribute the strong sales in the quarter and is that something it sounds like you don't think cattle to assist in third quarter curious, how you think about it in fourth quarter, where it in a normal year off now.
But this is not really minimal yourself just thoughts on that please.
Thanks.
So Scott this is keith or the way to look at sales is as follows as we always remarkets, a little hard depend on which quarter sales mainland, it's driven by customer requirements and sometimes you can run into site issues, where a project a customer hope to have completed in June can slide into July.
For a project that was expected to finish in September can slide into October. So these are things that we just face every year, but to step back a little bit.
I've tried to comment in the prepared remarks total company sales for the year, we expect to be comparable to 2000 to 19, so really year over year, similar enviroplex and mobile modular are important sources of those sales and if we look at the sort of flow.
Sales for 2020, we just had a very strong second quarter and seasonally we typically expect the third quarter to be higher than the second quarter. We actually expect that will be the case this year, but we do not expect to be as high as the very significant sales in the third quarter two.
I want to 19, and you may recall that enviroplex at a particularly strong concentration of its sales in the third quarter of last year and then if you look at the fourth quarter typically we see sales not as high as in the third quarter. So taking a step dawn. So does that help in terms of the sort of flow.
Sales and also acknowledging that high they actually get recognized a lot has to do with when the customer would prefer to have the project completed and then also be issue that you can run into site issues that can delay our revenue recognition for us in any particular mode.
Yeah. Thanks eat that was very helpful color and and I guess, a got at the underlying Oh, Yeah reading for my question, which was is there anything koby drill waiting social dispensing related that would prompt more sales this year than otherwise and yeah. I did hear you say, we'd be flat year over year, but I remember its big last year as you mentioned in the second half so.
But but nothing you're you're seeing there where where customers are opting to buy as opposed to rent and I think Joe pointed out early on that rent makes a lot of sense from customers, maybe little bit capital capital Scott good.
Yes, I assume that summarized it well between me up if not please but I guess my name's Cape May want to add yeah. We're seeing in terms of those education orders, yeah, nice flashing grades that yeah, I would I would say, where we're not seeing any you know shifts in.
How customers are going to procure there their space that they're going to need based on coal that we're not seeing a shift to sales or a big shift to rentals in our education customer base at this point and so there was sale projects that we recognized this quarter and that will recognize.
As you know throughout the rest of the year a lot of these have been in the works for a while now and they're just they're just coming to fruition that at this point.
So Joe when would you say that you are.
During the level you expected for a normal year or may maybe the education rentals are higher because of cobot in social distancing or you don't want to go that far yet.
Yeah. It said, it's a fair question, let me just explain a little bit of what we've been seeing with school districts.
It's been only in the last few weeks that we really started to get announcements from school districts on what their intentions are gonna be for the fall semester and I could say this this summer has been marked with a lot of confusion and.
You know.
I and unclear direction.
Regarding what school district should do and only in the recent past have some of them reversed their plans based on the fact that.
It really hasn't calmed down like everybody thought it would and so what we're seeing is is a more the public school districts leaning more towards virtual classes or some combination of having kids Bakken virtual classes and then we're seeing on the private school side and with.
Charter schools more of those students more of those schools appear that they'll have kids come back and so we're seeing more inquiries on classroom demand from that sector. Although that's a much smaller sector than our public school district customers is.
So I think the net out for us at this point is.
Aside from modernization projects, which we see progressing as planned we don't see a lot of additional demand for covert related.
Classroom space, but we're also not anticipating that we'll get reduced demand or returns from that I think looks like school districts I'll hold onto their classrooms. At this point because things are really just up in the air and they're very unknown at this point, what they're going to do and so they're just kind of hold onto their classrooms and so.
I'd say, it's it'll be pretty much neutral.
Throughout the remainder of the year.
Okay. Thanks appreciate that and then and then really same question that's in the module or after the commercial vertical in modular please.
Yeah. So in that part of the market what we're seeing is once.
You know clients got back into the field once shelter in place restrictions are lifted many projects resumed and we're seeing those projects continue and continue throughout the rest of the year and so we think that you know demand will be there it.
Lumpy as strong as it was last year, but we anticipate that you know those projects that have been in the works are going to are going to finish I think the question as you know in future quarters. A past 2020, you know really what's the pipeline Gotta look like for you know additional projects that are that are planned and that's just unknown at this point.
All right, thanks, and what I infer from that statement is that you're really not seen much on the return from whatsoever.
Near term the the new rentals pipeline is exactly that fine. It's looking out three four quarters and beyond where we are a little uncertain is at a fair summary, yeah, I think thats fair.
Hi, Thanks, I'll move off Bob I, just wanted to more for me in Trs Rentelco.
The you know you had sales elevated there as well curious on that and then just kind of what you saw in each in the month.
And any takeaways you had drawn from the progression of sales and rentals in the segment.
Yes.
That shaped your views for the second half.
Yeah, Scott. So first thing is sales that Trs Rentelco war werent necessarily up.
They were pretty.
Constant.
From quarter to quarter sequentially, and so we didn't really see a pop in sales there.
In that business, but I can tell you from just the demand side, yeah, we have to the two large segments in that business, our GP customers General purpose on our communications customers.
The general purpose customers really held onto their equipment and they continue to place orders and so we saw a reasonable amount.
The amount of demand through the quarter from them, we had their technicians that our clients that took test equipment home you know and we're conducting test at their house you know when people are sheltered in place so things kind of kept going as aerospace and defense projects and semiconductor work and all those things are really continuing when you.
Looking at the folks who are working out in the field.
In our communications side of the business those are the ones that really got affected by shelter in place you know they were all basically pull out of the field and not working for awhile.
But that started to come back a shelter in place restrictions are lifted and that field work has started back up again and we're hopeful that throughout the remainder of the year that that work is going to continue from what we know at this point you know the large carriers are not pulling back on any of their play.
Tends to rollout fiveg.
And so you know that field work is going to need to continue as you know this.
Desire for for bandwidth and.
You know additional bandwidth for people to access the internet of things and online as it just doesn't stop and so I think thats going to.
We should see reasonably healthy demand from that in the future.
Alright, Thanks, I'll just ask I'll, just ask one more I don't think it over to add work. This is you know you view it wasn't more than a year ago, where the majority of your end market served we're we're doing better year over year and that seems to have reversed.
Curious Edmund in fine if you don't want to share, but I'm curious what youre remaining end market is probably a little one of the six swaps that's still doing well and then is this mostly contagion affecting.
Activity from oil and gas or is it is it you cited kogan as well I'm curious just to kind of get a flavor for how much of it is tied to oil prices outside of the upstream segment or end market how much of the other here that's affected by that thanks.
Okay.
I'll take a a the first piece, which.
End markets showed some growth because you're right. It was really a reversal from a year ago, we only had growth in one area and it's really our catch all category or other and our primary markets. As you know weve upstream oil and gas we have refinery construction environmental services and industrial services they world.
Don year over year, the other was up and when we dug into that.
Thanks, several of the project that gave us a little bit of growth, where cobot 19 related we hit examples where some producers of hand sanitizer product needed more tanks and equipment to do the work. They were doing we had anecdotal unusual projects like a craft brewery that had to dispose of beer, which was and.
Soon than our equipment help them in that process. So the other category was the one area that was up slightly.
In some of that was co good related.
Okay. Thanks, appreciate that Keith and tragic then throw that there I'll turn it over.
We have pictures of that Scott. It was it was it was tragic.
Thats sad and sat Scandinavian.
[laughter].
Thank you and our next question comes from Sam England Bamberg. Your line is open.
Hi, Thanks, taking the questions just a couple from me first one in Atlanta was just wondering if you're thinking that's doing anything around cost coughing.
Not business.
Even in tail risks to the second half of this year, you just waiting to see how demand with how the during Q3 at this stage.
Yes, let me, let me address Adler I'm, Matt first thing I'd I'd like to say is we run that business very very lean.
And you know, there's there's not a lot of overhead or areas that we have to be able to cut costs out of that business I will say that.
We have clamp down on virtually everything.
That we can to adjust our rate of spend in the business and through attrition you know, we're operating with about 10% less personnel at this point and so yeah. We're at a place where we can kind of comfortably run the business and we're just have to see what happens over the next time frame as I said in my prepared.
Comments, you know, we think weve troughed in that business and so hopefully, we'll see some upside here as projects and demand for oil and gas and projects.
May resume at some of our clients.
Okay, great. Thanks, and then the next one you've seen the monthly rental rates dropping a bit in T sand on and I just wondered what the pricing strategy is heading into the second half and nice to this division.
Yeah. Just following on this is Keith I think at Adler, new surprises for the business that is available there, particularly spot business.
Projects, but just come up in the quarter, it's very competitive I think some of the headwinds. We've described that we've seen other than the industry and the business, they're seeing the same thing and we compete against some large players we compete against some small players pricing is tending to be competitive I would say in regions of.
The country that have an oil and gas presence.
It's even more heightened so that's just the reality the changes we referred to and you see in the numbers reflect that competitive environment with a lower level of demand.
It's different over at Trs I think on a like for like basis pricing is fairly stable and what we saw with our rental rate metric was a mix shift so as you'll recall, we saw overall rental revenue growth of 2%. If you break that out between the general purpose side of the business in that community.
Patient side, the general purpose part of the business actually grew about 12%, but the communications part dropped also by about 12%.
Communications is it slightly smaller part of the overall mix, but all of that mix shifting meant our which was the lower for the business as a whole so less a a sort of market price change.
More just that shift between our two primary segments.
Okay, Great and then maybe just one more around the Capex spend that's a third quarter, which added business is that going into and it's not ready to expand with incentive fees over that.
So if classes of assets I'm, assuming it's been a nice almost you know that youre looking to.
And in this quarter, yes, good question and I would say, we're being very selective and our teams are very collaborative and try to make good choices in this environment and just a really set the scene for you a little bit and the gross capex guidance that we gave in the 10 to 15 million range.
That number compares with a number in the first quarter that was 35 million and number in the second quarter that was 22 million and so you can see it's really coming down over the course of year and again 10 to 15 in the third quarter.
Business that generally see some needs for Capex first is the electronics business and that all relates to technology trends, new product introductions, replacing older technology with newer technology and that may well accounted for half or more of what we spend.
Side of that it will be very selective for particular product categories that are still in high demand in particular regions.
But it's clearly a much lower level of gross capex than we would typically see another thing I'll point out is if you look at us over the last few years, we've typically generated in the neighborhood of $40 million a year in proceeds from used equipment sales. So if were anywhere.
Towards the lower end of that 10 to 15, that's in the outlook.
We may have a net capex, if you will from a rental equipment point of view that zero or could even be negative under some circumstances.
Okay, great. Thanks for taking the questions and I'll pause.
Thank you and our next question comes from Marc Riddick with Sidoti Your line is open.
Hi, good evening.
Hi, Mark Hi, Mark So what the two well I wanted to start with a just a general if you could share some general thoughts as far as the funding environment.
Some of the funding environments that you're dealing with that there's sort of maybe a little bit then update there have there been any changes.
We should be aware of given the general investor concerns around state and local funding.
You know potential issues going forward.
Yeah, I'm, assuming you're you're.
Mostly kind of concern about how that that's going to affect the education business.
Yeah. So let me address that you know different states fund.
Education facility projects in different ways in California, you know there, they're mostly funded through bonds.
Yeah.
Like Florida. They are funded through sales tax revenues and so each state approaches there facilities funding differently in California.
You know unless.
The bonds or recall there unless there is no market to sell the bonds. When it comes time actually selling those bonds and funding those projects is a really good way for districts to be able to to get projects done and so in a state like California.
We feel more comfortable that that projects will continue in other states that go on sales tax revenues. That's that's more of a mixed bag and that could be a little bit riskier.
I'll tell you that at this point.
All districts are really concerned about right now is whether they're going to get their kids back to school or not and if so how they are going to do it and as I talked to all of our folks in the field and some of our customers you know they.
They.
Theres, they're not really concerned too much about the money at this point theres not a lot of talk about the funding environment.
You know states are counting on the fact that funding will be there.
In some fashion like in California through federal bail out and so they're they're hoping that.
Operating funds will be there and other states are looking forward to the same thing and school districts.
Our are just not really talking about the funding environment right now that's just.
More how they can get their kids back to school. So I think there's there's more to learn over the next quarter or too as we see the impact of potential shortfalls in state budgets, but it's it's kind of just a little early to really have that nailed down at this point.
Okay I appreciate the color on that that's really helpful to go over and I wanted to I think as others in the coupons that but it looks like mobile modular is about no 9%.
Oh portable sorry.
Going forward.
Per cent of Mcgrath Rentcorp total and the commentary earlier I think you said it was up 3% on revenue.
Correct rental revenues for the current revenue rental rep. Yet. Okay was there was that primarily driven by pricing would meet with the price volume mix was there and if and if I don't know if you can share.
If there any stronger industry customers that was more construction bang or or what you might be seeing there.
Yeah, I mean, it was up year over year sequentially. It was a tougher quarter compared to the first quarter and we did see a as we mentioned in the remarks weaker demand conditions early in the quarter things began to improve during the course of the second quarter.
So those are some of the dynamics at play there.
Okay, Great and then as far as and you talked about the the operating procedures that that you went through as far as updating those are just to deal with the pandemic I was wondering if you get to a sense as to where you are as far as making further adjustments or do you think you kind of where do you.
You need to be for now or you know because obviously had things keep changing but it was wonder if you could talk a little bit about Ah you know that process and if theres more to come there if you're comfortable with where things are right now.
Sure.
Well first thing is we follow CDC guidelines.
On on the the protocols that we need to make sure in place in the business and in many cases, we exceed CDC guidelines and so as those change will change along with it I don't think that.
Im not really anticipating a lot of additional changes at this point I think most of this.
Pandemic is related to folks just not observing social distancing, while they're all while they're not at work and the you know gatherings and things like that that you hear about that are just keeping this virus alive and so I really don't see a lot of changes to our own operating profit.
Because I think they're very strict at this point.
Okay, great. Thank you very much for the color.
Yes. Thank you.
Ladies and gentlemen that appears to be the last question.
Now I'll turn the call back over to Mr. handle for any closing remarks.
All right well I'd like to thank everyone for joining us on a call today and for your continuing interest in our company. We wish you all health and safety in the months ahead, and we look forward to speaking with you again in late October to review, our third quarter results.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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