Q2 2021 Thermon Group Holdings Inc Earnings Call
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It is now my pleasure to introduce your host Mr., Kevin Fox Vice President corporate development. Thank you Sir Please go ahead.
Thank you Donna good morning, and thank you for joining today's fiscal 2021 second quarter Conference call earlier. This morning, we issued an earnings press release, which has been filed with the FCC on form 8-K and is also available on the Investor Relations section of our website during.
During the call we will discuss some items that do not conform to generally accepted accounting principles, we have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non-GAAP measures should be considered in addition to and not as a substitute for measures of financial performance reported and of course.
And with gap.
I'd like to remind you that during this call we may make certain forward looking statements regarding our company. Please refer to our annual report and most recent quarterly report filed with the FCC for more information regarding our forward looking statements, including the risks and uncertainties that could impact our future results.
Actual results may differ materially from those contemplated by these forward looking statements and we undertake no obligation to publicly update any forward looking statement, whether as a result of new information future developments or otherwise, except as may be required by law and now I'll ask Bruce stains, our president and Chief Executive Officer.
For his opening comments.
Thank you Kevin and good morning, we hope everyone listening is staying safe and in good health. We appreciate you joining our conference call and for your interest in Thermo Jay Peterson, Our CFO is with me and we will provide additional information on our Q2 financial performance following my remarks.
Since our Q1 call. The thermal on team has remained focused on the safety and security of our employees customers suppliers and the communities in which we live.
As a supplier to critical infrastructure, we remain open for business and have focused on supporting our customers around the globe.
As we look across the world our teams our customers are adapting to the new normal in many locations. We continue to suspend business travel work from home where possible and follow the applicable local health protocols.
I'd like to thank our thermal on employees around the globe for their commitment to our customers and our shareholders through these challenging times. Our employees are incredibly resilient and have quickly adapted to this new way of working.
Especially want to thank our front line employees that have continued to be onsite, serving our customers each and everyday throughout this pandemic.
Their commitment to our core values of care commitment and collaboration as well as our industry, leading safety performance is both admirable and appreciate it.
With the uncertainty surrounding this pandemic. Our team has remained focused on value preservation and cash management in Q1. The team took decisive action to reduce EPS DNA by 16 million in the fiscal year and just over 17 million on an annualized basis.
During the second quarter. The team has further reduced expenses expected EPS DNA spending by an additional $9 million in the fiscal year and we expect this reduction to continue on an annualized basis going forward in.
In addition, we have reduced manufacturing overhead by an additional $6 million, including a rooftop consolidation that will improve absorption on lower volume in Q4 and beyond.
Many of these savings are the result of the work. This team has done over the last four years to improve the systems processes and tools to generate deficiencies and unlock scale from engineering tobacco office processes.
We also believe we are well on track to deliver the $3.9 million in continuous improvement cost savings through our manufacturing operations.
We believe these changes have fundamentally repositioned the business to be more profitable during the downturn and generate meaningful operating leverage during the recovery.
It is important to note that these cost reductions were made while preserving investments in key areas that will help drive future growth such as frontline sales resources to drive globalization of the process, an environmental heating product lines and new product development.
I'd like to turn now to our Q2 results overall, we were pleased with the improvements we are seeing in the business. During Q2, we believe our Q1 represented a quarterly bottom in terms of both revenue and EBITDA, our second quarter showed sequential improvement in many areas with revenue.
Of 66.4 million.
While down 35% from a record prior year quarter revenue grew 17% sequentially.
We did see shipment delays due to logistics and supply chain shortages in some key electrical components that negatively impacted the top line during the quarter.
Adjusted EBITDA of 10.5 million was down 50% from prior year, but up 661% or $9.1 million from Q1 on improved volume and cost reduction actions gross.
Gross margins for the quarter were 43.6% down 57 basis points from prior year, but up 120 basis points sequentially weaker.
We continue to benefit from the receipt of the Canadian emergency waves subsidies, which have been excluded from the adjusted numbers.
GAAP and adjusted EPS were six cents this year and 12 cents a share respectively. During the quarter showing positive momentum on the sequential volume growth and cost reduction efforts.
We were pleased with bookings for the quarter at $75.7 million, which were down 18% from prior year, but up 25% sequentially relative to the Q1, 27% shortfall to prior year.
This represented a sequential double digit improvement even when adjusted for seasonality.
Our book to Bill of 1.41, 0.14 was positive for the third consecutive quarter with backlog growing by 8% sequentially and 16% year over year. In addition margins in backlog improved by 420 basis points during the quarter on a positive mix of business.
We continue to see weakness in our MRO business due to safety measures our customers have implemented in an effort to prevent the spread of the virus mini has suspended project base maintenance activities to limit the number of contractors on site and manage cash.
We also see numerous all the chemical projects, creating future opportunities, where producers and refiners are seeking growth markets for their capacity as demand for transportation fuels stagnates.
Growing demand for power across Asia, and other emerging markets will also create additional opportunities for our business going forward.
Finally, tightening environmental regulations that require lower sulfur fuels and higher cafe standards drives demand for a wide range of Fairmont solutions as well.
Turning now to transportation transportation represents around 3% of our revenues in fiscal year 2020, and as a growing segment of our business that offers an opportunity to diversify our end markets. After securing two large orders and light rail in the last two quarters, we continue to see <unk>.
<unk> transit opportunities that will expand the installed base in the U S and Canada to generate stable recurring revenues.
We also see additional opportunities to grow our presence in the less cyclical and markets such as food and beverage to further diversify revenue streams going forward.
Turning now to our investments in research and development.
We continue to invest in new product development that creates value for our customers and differentiate Fairmont solutions in the marketplace.
Key areas of investment include connected and smart control solutions advanced heating technologies and materials science.
We were excited to recently announced the new Genesis network, which extends our leadership position and smart connected control solutions.
This introduction builds upon the technology platform of our Genesis controller by creating a plant wide ecosystem employing a self healing mesh network with and I-i Ot Gateway and browser based supervisory software the combined system, which is backwards compatible enables operators to.
Have realtime operational awareness to improve the safety reliability and efficiency of their processes. The nurse mesh network also lowers total installed cost, while enabling brownfield locations to be cost effectively upgraded to the newest technology the.
The Genesis server represent star months first subscription based operational software platform that will create opportunities for future product and service revenue streams from the installed base.
While visibility is improving we continue to experienced near term uncertainty due to the number of variables influencing our end markets.
As a result, we remained focused on managing the five key priorities communicated last quarter. They are first.
The safety of our employees and customers second aligning cost structure to the level of incoming business.
Third driving continuous improvement programs to achieve that targeted three $9 million savings during the fiscal year.
For a cash management and fifth investing for future growth executing on these five priorities will position the business to perform during this downturn and more importantly, profitably grow as our end markets recover.
Looking forward.
Given the current level of uncertainty, we do not intend to provide formal guidance for fiscal 2021. At this time, we do believe that Q1 represented the quarterly bottom in terms of revenue and earnings due to COVID-19 restrictions there were in place combined with a normal seasonality of our business with queue to revenues down 35.
5% from prior year and bookings down 18%.
We expect the revenue shortfall to prior year to begin to moderate in Q3 and Q4.
We also expect the cost reductions to begin to have a meaningful impact to bottom line performance in the back half of the year with decremental margins and the 25% to 30% range.
As a result, we anticipate a small step down and trailing 12 month EBITDA in Q3, representing a bottom with trailing 12 month EBITDA expansion in queue for on lower volume.
The actions we have taken this year have positioned the business to deliver 100 basis points or more of EBITDA margin expansion during a downturn in the team is hard at work to build a path to deliver similar or greater margin expansion in the subsequent year.
And continue to actively manage the business, while remaining focused on executing on our strategic operational and financial plans.
As we look ahead I want to emphasize the strength and resilience of our business model and our ability to drive EBITDA and generate cash through the cycle.
We have a talented team that remains committed to serving our customers and creating value for our shareholders by focusing on the priorities outline fairmont as well positioned to emerge stronger more profitable business as our customers and in markets adapt to the next normal.
With that I'd like to pause here and hand, it over to J for more detailed review of the financials J.
Bruce Good morning.
And lighted protracted depressed capital spend environment our focus.
Continues to be on value preservation. In addition to funding specific strategic investments.
During the quarter, we recorded $2 million of restructuring cost related to the queue too costly.
And we expect these costs down actions, including the Q1 reduction in force to.
To reduce SG&A to approximately $34 million to $35 million for the second half of this fiscal year.
And we believe approximately 80% of these reductions are structural in nature and will provide incremental operating leverage when growth returns.
And since May of this year, we have reduced our SG&A by approximately 24% from 100 million down to $76 million to $77 million.
Also during queue to our Canadian subsidiaries qualified for and received a one $4 million benefit.
The Canadian emergency wage subsidy program.
And 400 K of this benefit was recorded under cost of sales, while the remainder impacted SG&A.
And while we have faced significant challenges an hour P&L related to COVID-19.
And the sustained decline in oil prices, our balance sheet remains strong.
And our cash and investments balance at the end of September improved by $51.4 million and.
And we also paid down for $4 million in debt.
And generated seven $2 million in free cash flow.
Net marks or ninth consecutive quarter of positive free cash flow.
Our capex spend for the second quarter totaled $2 million nets inclusive of both growth and maintenance capital.
And we expect fiscal 21 capex to be approximately 4.6 million and that's a year on year reduction of 54%.
Our net debt to EBITDA ratio was two nine X at the end of cute too.
And lastly, our capital allocation priority is to continue to reduce our debt through continued optional debt repayment.
And we remain confident in our current liquidity and ability to generate cash during this fiscal year.
And we plan to pay down additional that in the second half of this year.
And regarding M&A.
Sure pipeline remains strong.
However, due to our current leverage position, we do not anticipate any acquisitions in the near term.
Now turning to revenue and orders our revenue this past quarter totaled 66 $4 million.
And that's up sequentially by 17%.
And down by 35% against the prior year quarter and was in line with our expectations for Q2.
Our legacy revenue mix between MRO, and Greenfield was 64% and 36% respectively.
Versus a 53% and 47% in queue to a fiscal year 20.
And FX decreased total revenue by $1.1 million in the quarter.
And in constant currency, our revenue declined by 34%.
Orders for the quarter totaled 75 7 million.
Up sequentially by 25%.
And relative to the prior year quarter hour orders declined by 18%.
And that's an improvement from the Q1 decrease of 27%.
And our backlog of orders ended September at $118 7 million and that's the highest level in the last 18 months.
Albeit under depressed revenues.
And due to cost out actions and higher margin projects, we have seen our backlog margins improved.
To 33, 4%.
That's a 420 basis point improvement on a sequential basis.
Our book to Bill for the quarter was positive at 1.14 and that marks the third consecutive quarter of a positive book to Bill.
In terms of gross margins margins, where 43.6 and although they were down by 57 basis points.
Versus the prior year comp period.
We're up sequentially by 114 basis points.
And gross margins were positively impacted by 63 bids due to the Canadian emergency wage subsidy program.
Gross profit in the quarter declined by $16.5 million and that's attributable to the volume and revenue decline of 35%.
And looking forward to the second half of this fiscal year.
We expect gross margins to improve by 100 basis points or more.
Due to the benefits of cost reductions.
Even in light of the anticipated production and year on year volumes.
And an increase in the mix of.
Our high margin on both a gross and net construct maintenance business.
Moving on to Opex.
<unk> expenses for the quarter that is SG&A and this excludes depreciation and amortization of intangibles.
Totaled 21 million versus 25 $4 million in the prior year and SGA SG&A expenses include $2 million of restructuring costs.
Normalized for the Canadian wage subsidy program and the restructuring charge.
Our SG&A on a pro forma basis totaled $19.9 million.
And as mentioned earlier, we expect our second half SG&A to be in the $34 million to $35 million range incur.
Inclusive of the recent spending production actions.
And going forward, we would anticipate incremental spending and travel and other expenses to grow.
As volume returns.
Gap EPS for the quarter totaled six cents a share.
Compared to the prior year quarter of 21.
And that's a decline of 15 cents a share.
Adjusted EPS.
As defined by gap EPS less amortization expenses and any one time charges totaled 12 cents a share relative to 29 cents a share in the prior year quarter.
And versus the prior year comparison period, adjusted EBITDA declined by 50%.
And adjusted EBITDA as a percent of revenue.
Improved to 16%.
And that's an increase of 1300 basis points.
Versus the prior sequential quarter.
And adjusted EBITDA totaled 10 $5 million this past quarter.
Free cash flow was positive for the quarter by $7.2 million.
And as I said before our ninth consecutive quarter of positive free cash flow and we remain confident in our ability to generate cash and service that going forward.
Four Q2 of 21, we generated pretax income of $1.2 million.
And recorded a tax benefit of 627.
Dollars.
And this benefit was due to U S. Treasury regulations that provided updated guidance to the tax reform law of 2017, and the associated guilty tax rules.
And as a result.
Reversed one $4 million of previously recorded guilty tax.
And for the remainder of fiscal year 21, and the out years, we expect our tax rate to be 26% on a consolidated basis.
In the quarter cash grew by $3.1 million to $51.4 million and we generated nine $2 million from working capital.
And over the last 12 months, we have paid down $33 million in debt.
And finally.
Given the continued impact of COVID-19 to our end markets.
We will not be providing formal topline guidance at this time.
And I would like to reiterate that we will continue to manage what we have control over including our operating expenses.
Cost reduction efforts.
Continuous improvement initiatives.
And the continued management of our working capital.
I would now like to turn the call back over to Donna to moderate our Q&A session.
Anna.
Thank you, ladies and gentlemen last question Amy.
Darwin on your telephone keypad.
A confirmation tunnel.
Q.
I think.
Of the queue.
Fantastic Speaker.
Sorry to pick up your handset before pressing to start.
My first question.
Graham a prototype securities. Please go ahead.
Hey, good morning.
Scott very well gone very good execution.
Thank you I do have a couple of.
<unk>.
More 40000 foot questions and then maybe a couple of 5000 footers.
As you look at the market right now and I, certainly speaking largely oil and gas and frankly, even maybe even more specifically greenfield.
It does look like Brent sort of land locked it this $40 level what are your customers.
Saying that that means that they're greenfield their capital spending.
Whereas bottoms in other words right. So so if it's down this year in the calendar year, but we'll be down again next year because of that level.
Yes. This is Bruce.
I'll tell you, there's still a lot of uncertainty on capital spending with our customers but.
As I mentioned in my script, what we're seeing is there are.
There are a number of customers that are much more impacted than others.
I think it's important to reinforce that.
If we look at the last downturn any oil and gas sector.
Where therm on prior to that downturn in 2014, 2015, 30, <unk> really benefited from the investments in the oil sands.
Since that time and at that time upstream with a much larger percentage probably two five times the percentage of our business that it is today today, we've repositioned the business much more were much more exposed to gas where a lot more exposed to chemicals in petrochemicals and we were able to drive growth.
All kind of.
Following that last downturn in those areas. It really wasn't an upstream spending so I suspect the price of oil will continue to have a pretty significant impact on upstream operators as well as integrated oil companies, but as I mentioned, there are others pure chemical plays that.
Chemical companies they are less impacted in fact, some of the in certain areas.
Because of some other supply disruptions we saw in the in the Gulf Coast, particularly with the Hurricanes to hit Louisiana, We've actually see seen resin prices spike. So in some of those areas. We expect them to be healthier have better cash flows and capital investments to move ahead.
So I guess that would be how are I could care characterize it I don't really think I could necessarily quantify it.
It's fine thank you.
World Groping for that answer.
If we would if we were to look at your backlog right now.
Obviously, it's the number.
Looks good but.
Would you be able to quantify how much of the backlog, let's say six months ago was expected to be shipped and.
Was not was like how much of your backlog increase was.
Not necessarily planned right, so pushing out of shipments.
Versus warriors.
Yes, Scott.
Rather minor amount okay.
Less than $5 million.
And recall, we are we are very late cycle with our projects, where the last oftentimes, one or two or 3% of the activities needed to to do the full commissioning so a rather rather minor amount when we have not seen a significant protraction.
And the execution of our backlog at this point in time.
Okay. So let me just connectors cheat dots. The question that Bruce answered. The question that you just answered shape. Thank you.
To this end.
In the past you guys have in Greenfield been about two to.
Three quarters behind general purpose capital spending in oil and gas.
Again on the Greenfield site and.
Do you guys see anything different.
This cycle again, notwithstanding when capital spending improves but.
Has that extended.
Do you think that you will still be in that two to three quarter lag of one capex bottoms.
Scott This is Bruce again.
I expect it to be similar.
During the last downturn, we did see we did see timelines move out normally our backlog, we executed 12 months.
Some of that could couldn't we saw that extends as much as 18.
As we look forward I still expect us to lag bye.
I'd say two to four quarters, the Capex recovery, just because of where we are in the cycle I do however, we want to a point to a fundamental difference in our business. When you look at the environmental and process heating products.
Which is about 25% of our revenues those are about those are much earlier in the recovery. So we saw those turned down more quickly and we expect those to rebound sooner. So that's an important.
Shift to consider when you're kind of looking at the business on a go forward basis.
Yep.
Last question. This is maybe for J J could you kind of give us.
The specific.
This quarter cost reductions I think the numbers you gave four annualized correct me if I'm wrong right.
Four within SG&A within it and within cost of goods sold what the specific benefits where this quarter do you have that.
Yes, four four SG&A, we exited last year for SG&A, approximately 100 million slightly over $100 million.
In queue to we discussed that the reduction would go down to 88.
<unk>.
And we are now viewing.
Somewhere between 76 and $77 million for the year. So Q1 was.
12 million and then add another million ish, maybe 2 million.
For this current quarter.
And Q2, we've gone from 25 to a pro forma basis of 19.9 million X the Canadian wage subsidy in the restructuring charge.
Yeah that would be operative number set.
Second quarter, right shade that 6 million.
Yes.
And then on the cost of sales side.
We have let me give you this fiscal year because a lot of these still need to blend in.
We've identified one $8 million worth of overhead related cost reductions.
On a future basis at 12 month basis, we believe that will be $3.8 million. So three $8 million over the next 12 months of which $1.8 million will be realized and then Bruce talked about the.
Strategic sourcing and the cost reduction initiatives and that will be over and on top of the overhead cost reductions I just mentioned.
Got it thank you.
Thank you. Our next question is coming from Joe Aiken of William Blair. Please go ahead.
Hi, Joe on for Brian today, Good morning.
Good morning Hangzhou.
So I guess I'll start.
I'm curious if you.
Talk a little in a little more detail about in the large project activity you're seeing right. Now you you mentioned a couple of projects you're working on.
Are there still some large projects being bid on.
And those markets or anything to highlight.
There's certainly a fewer number of capital projects out there I mean, we expected that coming into this year and that's certainly been reflecting in our new reflected in our incoming order rates.
The larger projects that we see today tend to be in the eastern hemisphere.
We see particularly weakness in the near term and larger projects in the U S. In Latin America.
And to a lesser extent.
In Canada, but.
So right now the overall capital spending without question is down in the 25.
30% range from from what we had seen.
A year ago.
Okay. Thanks.
Can you just clarify it from any kind of order trends, how that trended through the quarter I think on the first quarter call. You said it was down 33% in July.
And you say that ended up being down 18% for the fall quarter is that right.
Yeah. That's correct. So we saw we saw improvement in in the incoming order right during during the quarter sequentially.
I think the really important thing to anchor on as we saw we've been seeing improvement in our quick turn business, which is really the the R. MRO, it's a proxy for our MRO business and it's the most profitable piece.
Of our revenue on the installed base. So we are seeing some sequential improvements there and that's certainly promising although they are still well below prior year levels.
Okay and did you say, what your incoming order, it's or October or.
I have not mentioned it I did say, we expected to see some sequential improvements in our in our quick turn business and that we have seen.
But as I mentioned also during the script, we do expect headwinds in in the capital projects in the back half of this year, particularly in the U S. In Latin America.
Okay. So just to stick on that for a second so sequential improvement will that be compared with.
The full.
Order and coming right of down 18% sequential improvement from that.
You have to understand that's both maintenance and capital so that that would that would not be a good way to look at it it's a C sequential improvement on our maintenance.
Incoming order right and I see I see.
Weakness in the capital so.
Okay. Thanks.
And then just turning too.
Margins I think J, you said you'd expect gross margin to improve 100 basis points or more in the second half of the year is that on a year over year basis and.
Would you expect given there's some moving pieces there with.
The cost reductions and the overhead reduction or do you expect to see more expansion in the fourth quarter compared to the third quarter.
Yeah that 100, bip improvement or more was on an annual basis.
Right.
Okay, Okay and.
Okay, and you would expect more of that to come in the fourth quarter compared with third.
Yes, yes, because some of these cost out actions have too.
They take a little time so.
And depending on how costs are rolled in such in manufacturing absorption that doesn't all happen and.
Immediately.
Okay. Thanks for taking my question of the guys.
Okay. Thank you Joe.
Thank you. Our next question is coming from Tom.
Kansas City capital. Please go ahead.
Alright J Bruce.
Good morning, John Bruce corner, you talked a little bit.
More about some of the alternative energy projects bio diesel bye bye biogas I'm curious.
What type of.
Content heat tracing content is on a on a project like that how does that compare to petrochemical plant power.
A refinery or what have you.
It certainly John is certainly depends on the size of the processing facility. That's certainly has great influence.
But for example, I think is important to note historically refineries have been heavily weighted towards steam when.
When you move towards things like biodiesel, they're almost exclusively electric so that's a big shift or a transition from steam two electric that we see in maybe for those of you.
And update its around 48% steam 52% electric when we look at the markets globally, a big part of that has been in refining.
So as we look at let's say a biodiesel plant that I had mentioned those may range from depending on the size and the scope of work from half a million to $2 million in total heat tracing content and that's almost exclusively.
Electric heat tracing there are additional opportunities in process heating and temporary power, which are not included in the numbers I just shared okay. Okay any other.
I'll turn of energy type of projects.
There's been a lot of talk.
About hydrogen I don't know titration.
Ah required for hydrogen but.
Anything beyond biodiesel biogas.
There are other opportunities. The one that really is real today is concentrated solar power those are pretty significant when it comes to heat tracing opportunities and we've done a number of those projects around the globe.
We don't play much in the photo Voltaic Yep.
Today.
Limited opportunities in wind.
But but.
Oz or at least a couple of examples hydrogen it's a little early there yeah, and certainly that would be an area that we would continue to explore as as that.
That becomes a greater part of the overall energy mix, we think that's probably beyond the five to 10 year Mark sure sure. Yeah, What'd, you say concentrated solar power do you mean utility sized projects.
<unk>, Okay, Okay alright.
Okay that sounds good and Jay.
One so forward look really forward looking question.
Obviously taken a lot of costs out of the business.
And.
When the revenues return.
Should they return to prior levels.
And so on.
What do you think how do you think your margins could be relative to where they were in the past they were up by.
Towards 20% something like that but.
Given a return to.
Quote unquote more normalised revenues.
And then given the costs you've you've taken out.
Are we beyond that 20%.
And a better environment.
We are we are recall at four or five years ago. When a lot of the upgrade is in Canada.
Happening and by the way, we are not planning for that too.
Reoccur right, we had EBITDA often times at the 25% range going forward, we think it will be somewhere in the 22% to 25% range. Once we see upticks in volume.
EBITDA margins.
Correct, Okay. Okay, alright, thank you very much.
Thank you. Thank you John.
Okay. Our final question today is coming from Andre caller of Evercore ISI. Please go ahead.
Good morning, Thank you think hey, guys. Thanks for taking my questions here.
Thank you.
So definitely understand where you're coming from on on not providing new guidance for the remainder of the fiscal year. There's there's just a lot of uncertainty out there and the recent resurgence of Covid in Europe for example.
Just wanted to any reason to give people pause I guess this is more just a qualitative question for you, but as as in leadership comps.
Companies operating globally in the industrial in energy markets, what kind of things would you need to see take place in your markets or.
And what you're seeing your day to day in order for you to feel confidence in providing.
<unk> or reinstating that near term forward outlook.
Yes.
We are looking towards that in the coming.
Quarters certainly.
Just one quarter later, our visibility is improving but as you noted there still is some.
Some uncertainty around some of the resurgence and things like that and how that may impact a whole host of things.
But we would like to see just.
The rates under control and see a little more.
Consistency and some of the demand environment that we're seeing with our customers. So.
I think I think covid as in really getting that at least to manageable levels.
Will be important.
For us to to have better visibility.
Four to provide forward guidance.
Okay.
I hear Ya on that.
If we move on to let's say some some of the inroads that you've made in the digital area and some of your new.
Products.
How do you think about ensuring are you able to catch some of that value that speed provided to the customer.
Whether in terms of greater efficiency spam or savings or or is that just increasingly viewed as table steaks and your sexual these days.
Curious kind of here how you can you can catch us owners.
Some of these technologies are available are available in other areas in the industry, but within our space.
Really.
In front here, it's really we're seeing a significant amount of demand from our customers for these types of solutions and we really have seen since.
COVID-19, it's accelerated the need for these types of technologies.
As we look forward.
We said this is our first subscription based software.
That's an operational software that our customers can use.
To manage their their asset base. It also sets up the opportunity to drive additional revenues on on services on the installed base whether that be.
Online and virtual types of services around a predictive maintenance in troubleshooting things like that.
Even on on stream online and excuse me an on premise type of maintenance opportunities and really driving MRO sales. So.
I believe this is well beyond just.
Me too and also needed were out in front here and we see some really significant opportunities to drive additional revenues on the installed base and there are real true value propositions. When you look at the impact that can have on our customers and how they manage.
Their their assets.
Okay, great. Thanks, Thanks for elaborating on that and that makes sense that was all the questions I had at this time and thanks again ill him it back over.
Thank you Andre Thank you.
I'd like to turn the call back Covid, Connecticut Ah closing comments.
Alright, Thank you Donna I would like to thank you all again for joining us today and I appreciate.
Your interest in third Amman enjoy the rest of your day. Thank you.
Ladies and gentlemen, thank you for your participation that concludes today's events.
Disconnect. Your lines are lock off the webcast at that time and have a wonderful day.
Okay.
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