Q3 2021 Thermon Group Holdings Inc Earnings Call
[music].
Greetings and welcome to be firm on group Holdings third quarter, 2000, and 'twenty, one and earnings conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation. If anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I will now turn the conference over to our host Kevin Fox Vice President Corporate development. Thank you you may begin.
Thank you Diego and good morning, and thank you for joining today's fiscal 'twenty 'twenty, one third quarter conference call earlier. This morning, we issued an earnings press release, which has been filed with the SEC on form 8-K and is also available on the Investor Relations section of our website during the call. We will discuss some items that do not conform to.
Really accepted accounting principles, we have reconciled those items to the most comparable GAAP measures and 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 in accordance with GAAP 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 SEC for more information regarding our forward looking statements, including the risks and uncertainties that could impact our future results and our actual results may differ materially from those contemplated by these forward looking statements and we own.
<unk> takes 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.
With that we will turn on to the opening comments from Bruce names, our President and Chief Executive Officer.
Yeah.
Thank you Kevin and good morning, we hope everyone listening is staying safe and and good health and we appreciate you joining our conference call and for your continued interest and Fairmont.
Jay Peterson, our current CFO and Kevin Fox, our future CFO are both with me to provide additional information on our Q3 financial performance following my remarks.
Before we begin a day I really wanted to take this opportunity to thank Jay for his service to firm on since 2010.
Jay was instrumental and taking this company public.
And has really made significant contributions to this business and and its shareholders.
Since that time and day leaves us in a very good position, we wish him and his wife, Laura all the best and their future endeavors.
With that I'd like to now turn to the quarter and since our Q2 call. The firm on team has placed the safety and security of our employees customers suppliers and the communities and which we live as a top priority and.
The supplier to critical infrastructure, we have remained open for business and are dedicated to serving our customers around the world.
I continue to be inspired by our team and would like to thank each and every therm on team member around the globe for their commitment to our customers our shareholders and each other through these challenging times.
With the uncertainties surrounding this pandemic.
Our team has remained focused on the five priorities outlined in earlier calls they are first the safety of our employees and customers.
Aligning cost structure to the level of incoming business third driving continuous improvement programs to achieve the targeted $3 9 million and savings during the fiscal year fourth cash management and fifth investing for future growth.
As we review the results of this quarter it'll become evident that our efforts and each of these areas are yielding positive results in the business in Q3, the cost reduction actions, which included reductions in force facility closures and consolidation of legal entities and the divestiture of the South African business.
Have been largely completed these efforts will reduce SG&A expenses from FY, 'twenty and 'twenty by over 22 million and the current fiscal year, and approximately 23 million and fiscal year 'twenty two.
In addition, our continuous improvement programs have yielded $3 8 million and projected savings within the fiscal year versus the target of 3.9 million outlined in our Q1 call.
This continuous improvement program is an integral part of our operational discipline and will serve to both preserve and expand gross margins going forward.
We believe the cost reductions implemented this year, 80% of which are structural and fundamentally repositioned the business to be more profitable during the downturn and generate substantial operating leverage during a 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 globalize, the process and environmental heating product lines and new product development.
I would like to turn now to our Q3 results.
Overall, I'm very pleased with the strong operating performance and execution by our team.
As we stated last quarter, we believe our first quarter represented a quarterly bottom in terms of both revenue and EBITDA. Our second quarter showed a sequential improvement in both of these metrics when adjusted for seasonality.
The third quarter continued this trend with revenues of $79 6 million down 21% from prior year, but up 20% sequentially adjust.
Adjusted EBITDA of $18 5 million was down 11, 2% from prior year, but up 77% from Q2 on higher volume and cost reduction actions.
Gross margins of 46, 4% for the quarter expanded by 310 basis points from prior year, and 285 basis points sequentially on a flat mix of MRO UE versus greenfield at 62% and 38% respectively.
We continue to benefit from the receipt of the Canadian emergency wage subsidies, which have been excluded from the adjusted numbers.
Adjusted EPS was 30 cents a share for the quarter and two cents over prior year on 21% lower volume, we're very pleased to be reporting growth and adjusted earnings demonstrating the positive impact of continuous improvement and cost reduction efforts in the current environment.
Bookings for the quarter ended at $71 million, which were down 28% from prior year and 6% sequentially for the first time and four quarters, our book to Bill of 89% was below one.
Backlog group by 7% over prior year, but declined 7% sequentially. These booking levels are consistent with our forecast of a weaker capital environment and the second half of this fiscal year. However, as anticipated we did see a sequential 19% improvement and our Q3 quick.
Turn business when adjusted for typical seasonality as we entered the winter heating heating season.
We continue to believe the deferral of maintenance is building pent up demand that will create incremental opportunities for MRO UE as COVID-19 restrictions ease and.
We expect capital spending to be weaker in the fourth quarter of this fiscal year and into fiscal year 'twenty, two particularly in the U S and Latin America, representing a near term headwind that should be somewhat offset by increased maintenance spending and higher gross margins.
Just as a reminder, the gross profit impact of a dollar of MRO UE revenue is worth approximately $2 and greenfield revenue due to the difference and the margin profile of these two revenue streams.
We continue to generate positive cash flows from our operation of $2 9 million during the third quarter, which enabled 5.6 million and debt repayment, leaving $49 6 million and cash on hand at the end of the quarter.
We see further opportunities to continue improving working capital and helping to steadily reduce our net debt to EBITDA over the next several quarters.
Turning now to a discussion of our end markets. We're beginning to see some signs of improvement and our end markets that are cause for cautious optimism, we have seen sequential improvements and maintenance activity that are above and beyond normal seasonality. Despite the lockdowns late in Q3, we've also seen a.
Substantial uptick and quotation activity late in the year.
Some of the areas that show the greatest promise on chemicals, and petrochemicals power and natural gas opportunities chemical and petrochemical companies have seen much less decline in demand and commodity pricing has been more resilience as we look forward dorm on has technologies that are well positioned to help enable the and.
G transition and de Carbonization movement, our solutions contribute to this transition and a number of ways first the transition from steam to electric heating technology has been underway for decades, and thermal and electric heating solutions reduced on site emissions, while improving efficiency.
Troll and safety we.
We see this electrification of process facilities accelerating in the coming years, increasing demand for our heat tracing process heating and environmental heating solutions, where steam is the best solution Sermonize systems, lower initial capital costs and improve overall operating efficiencies in some cases.
Gas fired boilers are being converted to electric to reduce onsite emissions and improved control.
We also have several technologies that contribute to monitoring or reducing emissions of the process industries. We serve our tubing bundled solutions enables sampling from industrial processes to monitor and control the and Maher environmental emissions are new.
Number of our solutions are employed and processes like sulfur recovery units, which require high temperature processing to reduce the sulfur content to create cleaner burning transportation fuels.
Many of these same technologies are used and production and processing and renewables such as biodiesel and ethanol.
Finally, we have a new patent pending technology being beta tested that converts fugitive natural gas emissions to C O two and water, thereby reducing the greenhouse gas effect by over 20 times.
With <unk> expanded portfolio of solutions that now include process and environment mental heating, we see additional opportunities to grow our presence and less cyclical end markets, where we have traditionally participated.
Some of these markets include food and beverage commercial transportation and materials processing.
The transportation sector only represented 3% of revenues in fiscal year 2020, but it is a growing segment of our business representing over 15% of our backlog at the end of Q3, we continue to see large transit opportunities that will expand the installed base and the U S and Canada.
And to generate stable recurring revenues going forward.
Turning now to our investments in research and development.
We remain committed to investments and new product development that include connected and smart control solutions advanced heating technologies and materials science and a great innovations across these and other technologies are creating value for our customers by lowering maintenance and total installed cost while improving efficiency.
These reducing emissions and increasing safety.
The new Genesis network, which extends our leadership position and smart connected control solutions has been received very positively by our customers, we will be announcing additional new product launches in the coming quarters to build on this and other capabilities.
While the level of uncertainty and our current environment remains high with a current infection rates globally.
We are reinstating formal guidance for the fourth quarter of fiscal 'twenty 'twenty, one and two a projected 69 million to $76 million and revenue for the quarter.
We believe that Q3 represented the bottom in terms of trailing 12 month, adjusted EBITDA and that Q4 will be an inflection point due to a lower cost structure and improved gross margin profile of the business.
Going forward, we maintain a laser focus on driving operational improvements to positively impact. The overall profitability of the business. We are building plans to deliver an additional two to 300 basis points and FY 'twenty, two EBITDA margins over fiscal year 'twenty, one and further.
<unk>, adjusted EBITDA margins to 22% or more and fiscal year 'twenty three as the global economy emerges from the pandemic and our end markets recover.
We also remain committed to our strategic initiatives and driving growth and the business going forward.
We see four key opportunities for growth over the next several years. They include globalization of the process and environmental business diversification of end markets growth and developing economies and technology enabled maintenance for our installed base.
We'll share more about these opportunities and the associated investments in the next earnings call. When we communicate our fiscal year 'twenty two plan.
In conclusion I believe this quarter is illustrative of the strength and resilience of our business model and our ability to drive profitability and generate cash through the cycle.
We have a talented team that remains committed to serving our customers and creating long term value for our shareholders by focusing on our operational and strategic initiatives therm on is well positioned to emerge a stronger more profitable business as our customers and in markets adapt to the new.
Next normal.
I would like to pause here and hand, it over to Jay and Kevin for a more detailed review of the financials.
Jay.
Bruce Thank you for the kind words and good morning.
Given the currently depressed capital spending and our end markets.
Our focus continues to be on value preservation.
And during the quarter, we recorded a $3 $8 million restructuring charge on a pretax basis related to the Q3 cost out actions we.
We expect these cost out actions, including the reduction in force and the first half a day or two.
To reduce our SG&A to less than $79 million in the fiscal year.
And we believe approximately 80% of these reductions are structural in nature and will provide incremental operating leverage when growth returns.
Also during Q3, our Canadian subsidiaries qualified for and received a $1 $7 million pre tax benefit from the Canadian wage subsidy program.
And $1.4 million of this benefit was recorded under cost of sales, while the remainder impacted SG&A.
Moving on to revenue and orders our revenue this past quarter totaled $79 6 million net.
And that's down by 21% against the prior year quarter.
And in line with our expectations for the quarter and.
And revenues were up sequentially by 20%.
The legacy revenue mix between MRO and.
And Greenfield was 62% and 38% respectively and this is the same split.
As in fiscal year 'twenty.
And foreign exchange decreased total revenue by $200000 and and cons.
Constant currency.
Our revenue declined by the same 21%.
Orders for the quarter totaled $71 million and relative to the prior year quarter, our orders declined by 28%.
Our trailing 12 month order rate currently sits at 298 million and that is down 22% versus the equivalent metric from the prior year.
Our backlog of orders ended December at $110 million, which is $8 million or 7% higher.
And at December 31, 2019, and.
And our book to Bill for the quarter was negative at 0.89 and this is the first quarterly decline and our book to Bill and the last four quarters.
Moving on to gross margins margins were a robust 46, 4%.
310 basis points versus the prior year comparison period and they were.
Were up sequentially by 285 basis points.
Gross margins were positively impacted.
And I, both continuous improvement efforts and the recent cost out actions.
Margins were also positively impacted by 177 basis points by the Canadian emergency wage subsidy program.
Gross profit declined by $6 $5 million and that's attributable to the volume and revenue decline of 21%.
And decremental margins.
We're only <unk> 31 per se.
Moving on to operating expenses.
Opex for the quarter that is SG&A and this excludes depreciation and amortization of intangibles.
$21 $8 million versus $23 9 million in the prior year period.
And SG&A expenses include $3 $7 million of restructuring costs.
And normalized but the Canadian wage subsidy and the restructuring charge, our SG&A for the quarter and this is on a pro forma basis totaled $18 $4 million.
And as mentioned previously we expect our fiscal year 'twenty, one SG&A to be less and $79 million net inclusive of the recent spending actions.
And going into next year, we would anticipate incremental spending and travel and other expenses to return but to be offset by the full year impact of previously announced cost reductions.
And lastly, it is notable that our investment and research and development is two X what it was in fiscal year 15.
Demonstrating our commitment to our Genesis solutions connected controls and polymer and other heating technologies.
Lastly.
EPS GAAP EPS for the quarter totaled <unk> 18 per share compared to the prior year quarter on 'twenty.
And that's a decline of <unk> <unk> per share.
Adjusted EPS and this is defined as GAAP EPS less amortization expense and any onetime charges totaled <unk> 30, a share relative to 28, a share and the prior year quarter or a growth of 7% and.
And versus the prior year comparison period adjusted EBITDA.
Declined by 11% and adjusted EBITDA as a percentage of revenue improved to 23% and that's an increase of 250 basis points versus the prior year quarter.
And adjusted EBITDA margins grew.
750 basis points sequentially.
And adjusted EBITDA totaled $18 $5 million this past quarter and.
Grew by 77% over the sequential quarter.
And tax the tax rate for the third quarter was 28, 2%.
And after accounting for the net impact of certain one time tax items and going forward our tax rate is expected to be approximately 27%.
And cash taxes for the year are expected to be approximately $6 million.
Now I'd like to turn the call over to Kevin to discuss our balance sheet and capital allocation.
Kevin.
Thank you Jay our balance sheet remains strong and we paid down $5 6 million and debt and generated $2 3 million and free cash flow, marking our 10th consecutive quarter of positive free cash flow. Our cash balance ended just under $50 million and our net debt to adjusted EBITDA ratio was 3.0 times at the.
And of the quarter, our revolver remains undrawn and we have over 55 million and total capacity available.
As a reminder, the net debt to adjusted EBITDA Covenant on the revolver debt stepped down to 3.75 times as of December 31st.
And we believe this quarter represents a trough of trailing 12 months EBITDA, we feel confident and our current position versus that metric.
Bruce and Jay both mentioned, the South Africa disposition and I wanted to briefly comment on that transaction.
Part of our restructuring and analysis, we determined thurmond's ownership was limited and the entities potential and sold the operations and December to a local consortium led by the existing general manager.
We signed a long term distribution agreement for thermal solutions and believe this new structure will better allow that entity to serve its customers and provide incremental opportunity for future growth.
We booked a restructuring charge of approximately $2 2 million, which includes a currency translation adjustment of zero point $8 million.
Quickly on Capex, our spend for the third quarter total 0.6 million inclusive of both growth and maintenance capital. We now expect fiscal 'twenty, one capex to be approximately $6 million, which includes $1 5 million for new equipment necessary to complete confirmed orders for upcoming turnarounds and Canada.
We are still on track to hit our core budget number of approximately four point and $5 million.
Our capital allocation priority is to continue to reduce our debt through optional debt repayments, we remain confident and our current liquidity and ability to generate cash during this fiscal year and we plan to pay down additional debt and Q4.
Regarding M&A, we continue to evaluate options for future acquisitions, and would expect inorganic growth to become a higher priority once we get closer to our target of 2.0 times leverage or less.
In closing I would like to reiterate that we believe this quarter is representative of the resilience of our business model and our employees' ability to execute for customers and shareholders. Despite lower volumes, we delivered 23, 23% adjusted EBITDA margins year over year, adjusted EPS growth and positive cash flow.
And the quarter.
However, I still see additional opportunities to focus on working capital and improve profitability over time as Bruce noted, we will have a more fulsome update on strategy and fiscal 'twenty two guidance during our next call.
Before we hand, it over to the operator, I want to pause and recognize Jay for his contributions to throw them on over the last decade. He has recruited a talented and global team guided the business through multiple cycles and helped build the foundation for our future success I am personally thankful for his expertise dedication and thoughts on our starting this transition period.
Jay all the best to you you and Laura and thank you very much.
And now I'd like to turn the call over to Diego to moderate our Q&A.
Thank you.
Ladies and gentlemen at this time and we will conduct a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Information tumbler and to keep that your line is and the question queue.
You May press Star followed by the number two if you would like to remove your question from the queue.
For participants using speaker equipment and may be necessary to pick up the handset before pressing the star keys. Once again press star one to ask a question one moment. Please while we poll for questions.
Okay.
Okay.
Thank you. Our first question comes from Brian Drab with William Blair. Please state your question.
Hey, good morning, Thanks for taking my questions and Jay Yeah. It's been good working with you and and we'll see if Kevin can can match your sense of humour on forward, we're going on going to Miss working with you.
Hey, Thank you, Brian it's been a it's been a treat thank you.
Hum.
Back to business here. So you know the gross margin on and why.
And if you could give a little more color just to help model and in the near term.
Do you expect that the.
And and sorry, if I missed this but the gross margin should be up sequentially and the fourth quarter or not and then can you talk a little bit more about how it should.
Trend from there.
And especially I guess, given the cost cutting and you said that there should be some upside to gross margin as we get into fiscal 'twenty, two but and anymore.
And on specific color there would be helpful.
Yeah, Brian This is Kevin and I don't think we're going to comment on gross margins going forward, but what I'd direct you and others back to us if we think about the sequence of the margin evolution through the year, we certainly expect it and it didn't have delivered on that improvement if.
If you think about the mix that's always the biggest factor when we look at gross margins, but really its focused on the continuous improvement efforts, we targeted $3 9 million and savings we've achieved I believe $3 eight of that will be achieved and the current fiscal year and certainly with the cost reductions we've made structurally and <unk>.
Certain regions.
We do expect those gross margin improvements to be sustainable the questions are going to be around the relative mix over time. So overall I think the execution leads us to believe we're in a good spot, but not going to be providing any comments on the specifics going forward.
Okay Alright.
You know what one thing that I'm curious about and this is Mike.
And not be the question you're expecting but.
The tubing bundles and.
Business and I'm, just you and if I look back and my notes over the years that their mine and this was.
You know, 10% to 15% of revenue and.
You know really benefiting from increased focus on pollution control. These like the heat on that right. The heating systems that are.
Keeping the analyzers that are detecting and pollution and the smoke stacks on.
You know Keith.
Keeping those operational and.
I'm wondering is that something you know a business that could perform better.
Potentially under the New administration, and how sizeable is that and what kind of growth are you seeing and that business today.
Today and going forward.
Yeah.
Brian This is Bruce yes, that's exactly what I was referencing and my comments around in markets tubing bond okay.
One of the solutions sets that are relevant.
Isn't too.
And that benefit from stricter environmental regulations.
That business roughly $40 million.
And kind of and and.
And a more of a normal year, but certainly opportunities to grow this year will be significantly off of that just due to a lot of the capital deferrals and some of the maintenance deferrals and things like that but still a nice segment of our business with a very healthy margin profile.
Okay and.
And then just in terms of the large projects that are out there.
And on some things are being pushed out but.
And any and again.
Really you know.
And projects on the horizon that you could talk about that you're bidding on or.
You know Mike might be coming up for bid.
And that that could.
You know help revenue and materially.
And.
As far as on the project.
As we look at our pipeline going forward.
We have seen an increase and overall quote activity I'll tell you the type of projects.
And would not be classified and <unk>.
As we might have said and we might have characterized in the past as mega projects things that $10 million or greater.
We see the project the types of projects were quoting today are are more you know one to two 5 million is more common.
So I don't see any big Mega projects in the next 12.
Months, but but we are seeing some some activity in quotations in kind of more of those smaller to midsized projects and so we do expect low capital environment to be challenged.
Particularly in the fourth quarter and and into next year.
But we do believe that debt we start we should start seeing some of those projects being let and as you know we're fairly late cycle. So I would expect to see some some backlog growth in the coming fiscal year.
And then and then see that converted to revenue maybe late in the fourth quarter, but probably more likely in fiscal 'twenty three and beyond.
Okay. Thanks, very much I might have a couple more questions, but ill get back on line. Thank you no problem. Thank you.
Thank you just a reminder to ask a question at this time press star one on your telephone keypad.
Once again to ask a question press Star one we'll pause for a few moments to poll for questions. Thank you.
Okay.
Okay.
Our next.
Comes from Brian Drab with William Blair. Please state your question.
Yeah, well and I was polite and I guess and.
And and back so low floor is yours.
I I I'm gathering debt.
Hey, I'm just curious.
CCI business.
He has a historically been.
Pretty pretty cyclical, I guess and and and exposed to industrial trends and coming out of that.
And Denmark and I'm just wondering you know that this is a material part of your business that I imagine is rebound with it has the potential to rebound quite nicely and and have some benefit from operating leverage as well is that fair and can you just talk a little bit about what youre seeing specifically for for CCI.
Yeah.
And absolutely Brian this business. So I think a couple of things to note it turns down more quickly so.
It's earlier cycle and so we saw that business actually began to slow.
Really in Q3 of of our fiscal year.
'twenty and and then really obviously decline with the pandemic.
Historically, what we see is that it recovers more quickly.
It also gives us a better ability to provide a solution set to some of these other.
And markets that we've touched in the past, but we've never really focused on you know and.
I would I would say commercial food and beverage the transportation sector that I noted there are several others that debt.
With this now this complete solution set.
<unk>.
Those products, those environmental and process heating products really give us the ability to have more critical mass and some of these end markets and we see that M.
As opportunities for growth going forward, you know as to your.
Question around leverage yeah, absolutely that that is a very high margin.
Business and and with some of the cost out actions it it's really delivering very attractive.
Overall gross margins and EBITDA margins are for the business and so we see that as being part of the operating leverage story going forward.
And Brian and I would I would just add as we look forward to the future we've talked about globalizing that business and the past having those resources now sitting in the eastern hemisphere, having those dialogues with customers the process heating and conversations happen earlier than generally the electric heat tracing as well so as Bruce talks about that solution.
And that's an opportunity for us to have a different and more wholesome, but also on earlier dialogue with our customers. So it does give us insight into the other heat tracing upcoming business as well and we still see plenty of opportunity to globalize that business and as demand shifts to the eastern hemisphere, we feel like we're pretty well positioned to take advantage of that and the coming.
Yes.
Got it okay, alright, well thanks, thanks, very much for answering my questions.
Thank you thanks, Brian.
Yeah.
Our next question comes from Jon Braatz, with Kansas City Capital. Please state your question.
Hey, everyone.
And and James and I wish I went and wish you the best of luck to retirement.
Great working with you and are nothing but the best.
Hey, John Thank you I really enjoyed working with you over the last 10 plus years and well.
Well, thank you very much Bruce.
Bruce.
When you look at your your let's say your core customers your legacy customers like on legacy clients.
When you chat with them about.
And when it's time to when will it be time to unleash their on leisure capital spending programs.
And what's really.
What might be the tipping point.
Those clients.
When they begin to spend again is there is there some.
Some type of macro factor that theyre looking at.
Debt might might cause them to open up their wallets.
John John and I tried to communicate this and the last.
A couple of calls and the reality is when we look at our traditional and markets and in customers.
Yeah.
They're not all seeing the same types of really a M.
The impact of the pandemic and certainly the energy downturn.
It's not impacting them all the same so.
And when we look at integrated oil companies you know I think what we've seen is just the stabilization and commodity pricing has certainly helped but theres still a number of them that debt are still running.
<unk> net operating losses, and so I think some stability and the price of oil and some increase there.
I see.
Hi, $50 $60, a barrel as being kind of an inflection point for spending are.
Clearly many of them are significantly reducing costs and overhead and are positioning themselves.
For a different environment going forward I would suspect that will lower.
That overall price level going forward.
At what point that will be I am not certain.
When we look at other end markets you know and.
And the chemicals petrochemicals.
We actually see a very different situation.
You know with with the pandemic certainly the impact to demand has been less but and we see really pretty healthy growth over the next five to 10 years and many of those and markets. We've also seen a re.
Resin prices are being really more buoyant and and we believe that debt will translate into more spending when we see some of the case counts come down a little more stabilization and.
And just the global infection rates associated with the COVID-19, So I think debt.
That's another example of end markets power.
Our markets, we expect to have strong growth over the next 20 years we've.
We've actually benefit fitted from quite a lot of that power transition from coal to natural gas.
We're going to benefit less from the move to renewables, but the reality is is natural gas as a bridge fuel a lot of power plants are going to be built and in Asia and other geographies and so we think that's actually a pretty positive momentum, even even now and going forward you know some.
That demand growth is industrial so certainly as industry recovers, that's going to drive more need for increased power supply and and should we should see these capital projects move ahead, but those are kind of our three.
Key end markets. Okay. Thank you Kevin do you R. J do you expect the Canadian sub wage subsidy to continue into 'twenty and 'twenty two.
John fiscal 'twenty, two or calendar 'twenty two.
Fiscal 2022.
We'd have to double check, but when we go through our planning with items like that we generally don't consider that something like ongoing obviously, it's a government program and you know I think we all hope it will have an end date I can get back to you on when exactly it's supposed to but we certainly don't count on those types of programs to continue and as a reminder, we adjust them out of the <unk>.
Else as well.
Do you expect it or do you expect some benefit and the fourth quarter group.
I believe we do expect some result, and the fourth corner, but I I don't want to quantify that we can probably let the past four quarters as prevalent and for what it might look like that Okay. And then one final question, Kevin you're the stock compensation expense was materially less and that what it has been.
Is it will remain at that level or something unusual on and this quarter.
There was a one timer related to some prior year psus that were adjusted out so I think theres, a special event and the quarter.
Quanta the quantum of that I can get back to you on but that was the driver for the difference between prior quarter. Okay. Alright. Thank you very much.
Hey, John if memory serves it was in the 600 K range or so okay.
Certain prior grants that will not be in the money. If you will okay alright. Thank you Jay.
Thank you John I appreciate it.
Thank you there are no further questions at this time I'll turn it back to management for closing remarks.
Thank you Diego.
I'd like to thank everyone today for joining our call. Thank you for your interest in term on and enjoy the rest of your day.
Thank you. This concludes today's conference all parties may disconnect have a great day.
Okay.
Okay.