Q4 2020 DMC Global Inc Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the DMC Global fourth quarter earnings call.
At this time, all participants have been placed on listen only mode on the floor will be open for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Geoff High Vice President of Investor Relations, Sir the floor is yours.
Hello, and welcome to Dmc's fourth quarter Conference call.
Joining today are president and CEO, Kevin long and CFO, Mike Cuda.
I'd like to remind everyone that matters discussed during this call may include forward looking statements that are based on our estimates projections and assumptions as of todays date and are subject to risks and uncertainties that are disclosed in our filings with the SEC. Our business is subject to certain risks that could cause actual results to differ materially from those anticipated in our forward looking statements.
DMC assumes no obligation to update forward looking statements that become untrue because of subsequent events.
Webcast replay of today's call will be available at DMC Global Dot com. After the call. In addition, a telephone replay will be available approximately two hours after the call.
Sales for listening to the replay are available on todays news release and with that I'll turn the call over to Kevin Kevin.
Thank you, Jeff and good afternoon, everyone. The dedication and resiliency of our employees during 2020 enabled DMC to advance its strategy during an extremely challenging year.
After a record financial performance in 2019.
Pandemic hit and severely impacted demand in our core energy markets.
We moved quickly to resize the company and our line are activity based expenses with much lower customer activity.
Our efficient and highly variable cost structure and asset light business model developed over the past several years.
Enabled us to complete the restructuring process in two weeks and with only minimal restructuring expense.
We reported full year sales of $229 million down 42% from a record $398 million in 2019.
Adjusted EBIT was $19 $1 million.
Versus $93 $8 million in 2019.
And adjusted diluted earnings per share were <unk> <unk>.
Down from $3 75 per share in 2019.
We ended the year with a record cash position of $53 9 million, which included $25 $7 million raised through our at the market equity program.
We also have a $50 million.
Undrawn revolving credit facility.
Throughout the year, we maintained our investments in research and development and innovation, which is reflected in the 24 patents. We were awarded in the 131 patent applications we filed.
Both of our businesses introduced new products and applications that further strengthen their competitive positions and expanded our addressable markets.
Yes.
We achieved one of the strongest safety records in company history.
Both of our businesses completed the year without a single loss time accident.
We also strengthened our market development teams promoted a new business president.
And added two talented board members.
The entire DMC team should be proud of their accomplishments in 2020 as I am it.
It was a very difficult but productive year.
Okay.
During the fourth quarter welcomed.
Well completion activity in north Americas, unconventional oil and gas industry.
Continued to improve albeit off a low base.
This led to increased demand for perforating systems from Dine energetics.
Our energy products business.
System sales increased 21% sequentially versus the third quarter.
<unk> reported a 24% sequential sales increase in its primary north American market during the fourth quarter.
The increase offset an anticipated decline in international sales, which were down 55% sequentially.
Dining energetics international orders, primarily address large conventional oil and gas projects and are typically have higher value than north American projects.
Before last year's anticipated fourth quarter International demand was strong and dining energetics customers has stated they expect a significant recovery in project activity. During this year's second half.
Dining <unk> introduced more new products in 2020 than in any prior year.
A&P companies are providing positive feedback on several new offerings.
Including the DS Lone Star and DFS and line perforating.
Systems as well as the DFS Microsoft's setting tool.
D S. Lone Star is a compact system equipped with next generation high performance charges.
That deliver large altra uniform entry holes.
And provide exceptional contact with the reservoir.
And three recent field trials that you utilized oriented lonestar systems.
98% of the perforating tunnels delivered fluid and proppant into the formation.
By comparison, the perforating efficiency of our competitors' best performing systems is typically in the range of 80% to 85%.
The technologically advanced E&P companies that perform these tests reported that the lone star system delivered consistent hydraulic fracturing treatment across the entire formation.
While also reducing the required pressure pumping horsepower by more than 20%.
The trials were completed with no mis runs or Misfires illustrating.
Illustrating the safety and performance benefits of our Iris two intrinsically safe initiating system.
Which is at the heart of all of our <unk> products.
To date <unk> has deployed more than $3 million <unk> two systems without a single safety incident.
The DFS Microstat setting tool has brought a step change improvement to a critical component on the perforating tool strength.
D. S. Microstat is used to set the frac plug at the end of each stage and a multi stage well.
And it is by far the safest most reliable and most compact setting tool on the market.
Similar to the shaped charges in our DFS perforating systems.
<unk> micro set comes with the power charge preloaded.
In addition, it does not require a buyer in CAD.
And as initiated by our wireless Eyas to intrinsically safe igniter.
It is fully disposable eliminating the dangerous redress process required by traditional setting tools.
It also works seamlessly with our D S perforating systems and enables our customers to streamline their supply chains.
Customer reaction to the performance of D. S. Microsoft has been very favorable.
In the current environment.
Certain operators and service companies have taken a.
A short term view.
And are making decisions solely on price.
Rather than focusing on safety reliability.
And total operating costs.
These companies are deploying lower cost older technologies or.
Or undifferentiated pre wired perforating components.
From third party manufacturers.
<unk> is taking a longer view and is focused on educating the market about the comprehensive benefits of our factory assembled performance assured systems.
Customers deploying our D. S systems are seeing improved synergies between their frac and wireline operations.
And are completing more stages per day.
With fewer people and less infrastructure.
We believe several of the pre wired components that have entered the market violate dining energetics patents.
And we have initiated legal action against these component manufacturers.
The COVID-19 pandemic led to a significant slowdown in economic activity, which in turn reduced energy demand and led to a steep drop in oil and gas prices.
This created a very difficult environment for E&P companies and their service providers.
Dynamic energetic supported its customers during a period of very weak activity and low pricing.
We are optimistic that a swift vaccine rollout will aid the economic recovery.
Support higher energy prices and.
And improved demand for our solutions.
As well completion activity continues to improve.
We are taking steps to restore our profitability.
<unk> recently announced a price increase that will take effect during the second quarter.
<unk>, our composite metals business is forecasting a relatively slow start to the year.
Which reflects the late cycle nature of its industrial end markets.
<unk> entered 2021 with a $40 million order backlog.
Which was approximately 25% higher than at the start of 2020.
In addition, the blended contribution margin of the associated orders is a strong 44%.
We remain confident that several large international orders.
Laid by the pandemic will be awarded to <unk> cloud in the coming quarters.
We also believe the medium to long range outlook for <unk> remains very positive.
As the business continues to expand its addressable market with new composite metal applications.
I'll now turn the call over to Mike for a review of our fourth quarter financial performance and a look at first quarter guidance Mike.
Thanks, Kevin and fourth quarter sales were $57 $1 million up 3% sequentially and down 34% versus last year's fourth quarter.
Dana Energetics reported fourth quarter sales of $35 3 million up 3% sequentially and a decline of 45% versus the same quarter last year.
North American sales increased 24% sequentially, which more than offset soft international demand.
Sales at Nobel plan were $21 8 million up 3% sequentially and flat versus last year's fourth quarter.
Consolidated gross margin in the fourth quarter was 21% down from 25% from the third quarter of 2020 and down from 35% in the fourth quarter of 2019.
The decline from last year, primarily relates to lower average selling prices on energetics and a less favorable project mix at Novo flat.
Diane Energetics reported fourth quarter gross margin of 24% versus 24% in 2023rd quarter and 38% in last year's fourth quarter.
<unk> reported fourth quarter gross margin of 18% versus 26% in the third quarter, and 27% and year ago fourth quarter.
Looking at our fourth quarter expenses consolidated SG&A was $12 $5 million increased 8% versus the third quarter and declined 22% versus the year ago fourth quarter.
We reported a consolidated adjusted operating loss of $736000, which excludes $82000 in restructuring charges.
Fourth quarter, adjusted net loss was $825000 or <unk> <unk> per diluted share versus adjusted net income of $9 5 million or <unk> 65 per diluted share in last year's fourth quarter.
Adjusted EBITDA was $3 6 million versus $17 $6 million on last year's fourth quarter.
Daina Energetics reported fourth quarter, adjusted EBITDA of $4 $1 million, while know about flat reported adjusted EBITDA of $1 9 million.
We further strengthened our balance sheet during the fourth quarter and ended 2020 with cash and marketable securities of $53 9 million, including $25 7 million raised through our asset market equity program initiated during the fourth quarter of 2020.
Looking at guidance first quarter sales are expected to be in the range of $55 million to $62 million versus the $57 $1 million reported in 2024 quarter.
At the business level debt energetics is expected to report sales in a range of 37% to $42 million versus the $35 $3 million reported in the 2024th quarter.
The wide sales forecast range is due to the recent severe winter weather, causing disruptions in Texas.
No about flat sales are expected in the range of $18 million to $20 million versus the $21 $8 million reported in the 2024th quarter.
Consolidated gross margin is expected in the range of 22% to 24% versus 21% in the fourth quarter.
Fourth quarter, selling general and administrative expense is expected to be approximately 12, 5% to $13 million versus the $12 5 million reported last quarter.
Amortization expense is expected to be approximately $325000.
Interest expense is expected to be in a range of $150000.
Adjusted EBITDA is expected in a range of three $5 million to $5 million versus $3 $6 million on the 2024th quarter.
Given the uncertainty regarding timing of the COVID-19, vaccination rollout and its impact on economic activity and energy demand, we're not yet providing full year sales and earnings guidance. We do expect 2021 capital expenditures will be in a range of $12 million to $15 million in.
In addition, full year amortization expense is expected to be approximately $1 $1 million versus the $1 $4 million reported in 2020 and.
And interest expense is expected to be approximately $425000 down from the $731000 reported in 2020.
With that I'll turn the call back over to Kevin.
Thanks, Mike.
We are encouraged by the improving strength of our end markets. We have entered 2021 with two very well run distances and the strongest balance sheet in company history.
More importantly, we have an exceptionally talented team of innovative and determined as employees.
They have supported the company and each other during a very difficult year.
As I mentioned before.
Streamed league grateful for their contributions.
We are now ready to take any questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
We asked a lot of posing your question you. Please pick up your handset if listening on speaker phone to provide optimum sound quality. Please hold while we poll for questions.
On the first question is coming from Steven again Giro Steven Your line is live please announce your affiliation and pose your question.
Hi.
Good afternoon, gentlemen, how are you.
Yes, thanks, Stephen good to hear your voice.
Alright, thank you.
A couple of things Kevin.
Just start with.
The fourth quarter on that.
Diet energetic side.
Gross margins and I was just you had a really good third quarter on I think they were basically flat in the fourth quarter.
With a little higher revenue.
Sure.
Give us a little more color around that.
Yes.
They are basically flat quarter to quarter, we have.
Our low fixed cost high variable cost business.
There is some absorption.
Obviously, when when revenue picks up on volume picks up but it was relatively minor and did it offset some of the product and geographical mix that we have for the quarter.
And so.
But as you can see the gross margins have kind of flatlined at that 24% compared to where they were a year ago at 38% to 40%.
Yes.
Steven just said.
Emphasized on the geographic mix in the third quarter.
We had $99 million and internationally and $4 million in the fourth quarter. So we actually had unfavorable mix.
Fairly significant unfavorable mix there from a geographic standpoint from 2021% margins.
Okay, great that helps.
Yeah.
I was going on but while we're on that topic international.
A little bit.
A little bit Lumpier right I mean, the second quarter was really strong third quarter.
Should we think about that in 2021.
The fourth quarter, a bit of an anomaly or should we just wanted to think about that is <unk>.
Usually international activity as a proxy for that business are there any sort of specific drivers we should look at on the international debt.
Yes, Steve It is very very lumpy and I think it's going to be.
<unk> in the first quarter, we expect it to pick up after the after the first quarter, but energetic that's at 30% to $35 million business, where we only did $4 million in the fourth quarter.
There'll be a late late first quarter. So we expect both businesses to pick up weigh on the second quarter and beyond and we're expecting a sequential 2021 increase in international activity over 2020, so just.
Just emphasizing the quarter was an anomaly.
Great. Okay, and then just one final one.
You have talked about this overhang of component low cost inventory in the channels and activity seems to have picked up.
Pretty well on the back half of the year.
And it seems to continue to be strong notwithstanding the troubles that our people and tax per gallon, which in the short term but.
Or where are we in that process on Monday, you announced the price increase and where are we working day.
Low cost stuff through the food chain and starting to maybe get kind of this reacceleration of on.
The integrated <unk>.
<unk>.
So we chose not to take.
A fair amount of business in the fourth quarter, we saw a fair.
Fair amount of low priced.
Selling on.
Of of components more so than systems.
<unk>.
It's probably best.
As rated by we had one competitor that was up over 60% in their energetics.
Close to 30% in their systems, but their revenues for the quarter were all the up 18% and so.
Thoughts on that as that was clearly.
Selling through inventory and are trying to regain share at low prices and what we felt were unacceptable profit margins they don't serve.
Our customers or the industry or ourselves well.
Situations, particularly within elastic demand.
And so so we saw a fair amount of discounting in the fourth quarter from already low prices I mean.
Diamond Energetics, which what we're talking about here.
The average selling price per gun is down significantly in 2020.
From where it was in 2019.
But we don't need practice, making guns.
And so there is a limit to how far we will go to.
Two.
To pursue business and we do not.
Earn our business on price, we earn it on technology.
And we will support our partner customers. So that they are competitive in difficult markets.
And so it's kind of a long answer, but we saw a fair amount of inventory coming out of the system in the fourth quarter.
And we would expect some of it in the first quarter of this year, but the majority of that should be out.
Our.
Our price increase is targeting.
Second quarter of 2021, when we're hoping that the activity is stronger for our customer partners in the industry.
Sure.
Great. Thank you for the color.
Thank you on the next question is coming from Tommy Moll Tommy Your line is live please announce your affiliation and pose your question.
Good afternoon, and thank you for taking my question.
Yes, good to talk to you Tom.
Yes.
So coming out of the last downturn to Kevin you took significant market share on the debt energetic side and.
I think a lot of that was driven on your ability to nudge the industry toward it.
Our systems.
Tight orientation at least for a chunk of the market, where you were the leader.
Are the leader.
I wonder.
In this current context.
As far as Q4 goes.
Maybe lost some share but it was more just.
Liquidating inventories at the competitors that was a driver more than any kind of shift in real customer preference on system versus component. So I'm trying to peer into the crystal ball here and think about as we go into this year.
If there is another big share gain opportunity in front of you or have you seen anything in terms of.
Customer preference where.
You ought to be able to capture a lot of that back or maybe even go beyond where you were the last time.
Okay.
Yes, I mean, we.
We lost a little bit of share in 2020.
But for the most part we maintained it we maintained.
Most of the our partners.
Maintained their reliance on our systems.
We have a very strong value prop.
Our position, we have a differentiated product debt.
<unk>.
To put it in perspective the cost.
Perforating systems as a percent of average completion job is less than 2% of the overall cost to the E&P.
And.
And yet our systems with when we look at the.
The.
Technologically sophisticated.
Companies that are deploying them.
The number of.
Stages.
That they are able to do per frac spread is up 35, possibly 40% year over year and one of the reasons for that.
Not the entire reason, but one of the reasons as they are deploying our systems.
So our systems are creating value in the completion that far exceeds the price of.
The.
The systems themselves and even the modest margin increases that we're looking for.
Or a fraction of a percent of the overall completion.
So because of the small cost, but the leading technology and how it enables a more efficient completion across the board.
We would expect to see our share.
Increase our continue to increase.
Based on the performance of the guns themselves, but the efficiency of the whole operation.
And.
We sell it.
At market pricing, we're not significantly higher.
The market and yet we have a differentiated versus an undifferentiated product.
And so yes.
We would expect the share to pick up.
But we also are focusing on the leading customers who are looking at the total value proposition.
And what our systems, how our systems help enable them and their customers to be more successful.
Other than just getting it down to the lowest common denominator and that's unit pricing.
Thank you Kevin.
It's helpful context, one quick follow up on <unk>, and then we'll move on to a different topic, but but just.
Circling back on the international dynamic versus North America, clearly theres been a divergent trend there.
And then in your guidance for the first quarter, there was a big swing for.
North America, which is understandable given some of the disruptions.
Ongoing as we speak today.
So maybe bracketing North America for a second just on the international side can you help us anchor.
Does it does it seem like the sequential here is maybe first quarter not all that different from fourth quarter second quarter and not all that different from the first quarter, but then third and fourth.
Ought to be picking back up again.
Or would you sketch it differently than that.
We think the second half of the year will be stronger than the first but we expect a stronger second quarter than we do the first quarter and the first quarter to look like.
Fourth quarter, and Thats baked into our guidance.
And our guidance reflects the <unk> situation happening in tech.
Texas right now.
And we wish everybody there.
All the best during a very difficult time.
And.
As we previously mentioned.
An odd quarter from an international standpoint for dining energetics and.
And just a soft quarter for mobile cloud also.
We expect both businesses to show.
Incremental growth year over year in <unk>.
Little bit stronger in the back half.
In the first half.
Got it that's very helpful. Thank you Kevin.
I wanted to pivot to M&A, which has been core to the strategy for some time on.
I'm curious.
Now full year pipeline is or how active your discussions are.
Currently what.
Just any kind of anecdotes you could give us there may be about.
What end markets you'd like to.
Expand into or or grow your presence and although we can't go that far understand just any context on the pipeline would be helpful. And then also.
<unk> have to ask should we be connecting the dots here with you have got a pretty substantial cash and marketable securities.
<unk>.
Is M&A, a likely priority for some of that dry powder or is there a different priority.
It is a likely priority, but it's longer term rather than near term.
And our.
Our pipeline is one that.
I need to say that we use a rifle.
<unk> and were very.
Selective.
On.
Companies entering that pipeline and how far we go down with that.
And.
I think that debt, we like the markets that we're in.
And we're going to continue to support those and look at bolt on.
Opportunities when it makes sense when it's a <unk>.
Product that can expand the total available market or improve our competitive position.
But we're also not opposed to two.
Markets outside of our our two markets today.
And we look at technology, driven companies with advanced manufacturing, which is what we.
Done are created in our existing markets and Thats led to the differentiation.
And stronger.
Shareholder returns overtime.
Thanks, Kevin I'll turn it back.
Thank you.
On the next question is coming from George on Lear Recharge. Your line is live please announce your affiliation and pose your question.
Good morning, Kevin morning, Mike.
Good morning, George.
Sorry, good afternoon apologies.
So you could almost per day.
Hey.
Okay.
Got that.
Yeah.
Just curious obviously being down here in Houston, and I can see it on it.
On a daily basis, and we've had heating.
Heating power water issues down here just given your facility in Blum, Texas. So I'm wondering if you could talk logistically about.
And what are issues, what our issue is kind of just describe the situation a bit and then maybe to the extent you can and I realize the situation is very much still fluid but.
How much debt is factored in those issues are factored into the Q1 'twenty one guidance.
Yes, I mean, we've lost.
If you will a week of production essentially in Texas.
And.
It chose not to have.
Employees come into the facility when the roads are bad.
And.
All the other things that are going on.
But I will say had we stayed in production we would have still had a difficult situation because our customers and a lot of.
The well sites have.
Stopped or lost their productivity.
And.
And we.
We expect to see that.
I will start coming back online next week.
And.
We can probably close the gap on product sales relatively quickly more so than some of our customers can close the gap on.
Completing wells.
So we feel that we're going to be able to meet the needs of our customers and it really is depend.
Dependent upon how.
How successful they are coming back online.
Great.
Zone.
Yes regarding the impact on.
Yes, I would say it's.
Yes.
Mike what is it 5% to 7% maybe or yes, we looked at it as a couple of million dollars that could get pushed out.
Into the second quarter so.
<unk>.
Adjusted our guidance reflected net of a wider range to see.
We might get those orders out, but again those orders might go up in Q2.
And again that certainly in line.
Our customers get up on speed.
Got it. Thank you guys both for that and then.
Just back on the dining energetics.
Margins.
And as we think about maybe taking some of this noise out that we're seeing right now in some of the noise in the fourth quarter with regard to mix as we think about Q2 2000, plus is there an incremental margins range that you would push us to or what would you expect normalized incremental margins to be in the back half of the year, maybe any training.
There would be helpful.
Yes, I think were hesitating to give guidance on the on.
Revenue and margins for the back half of the year because theres so many variables with.
It's all quite frankly, driven by the vaccine economic activity, how that impacts oil and gas and our and our our market demand.
We expect our market share to be steady to improving and then.
Yes.
Announced in <unk>.
Initial price increase, but theres still a lot of <unk>.
Time between now and when that takes effect and so it's just hard to forecast the margins.
Outside of the.
Outside of the first quarter.
Maybe said another way.
Do you expect.
Do you expect higher margins as we progress through the year without regard to the magnitude.
Without a doubt.
Perfect and then I'll sneak one more in just more born out of curiosity than anything yet press release on your prepared remarks, you guys talked a bit about <unk>.
Lone Star system on Lone Star surcharges.
Which was fascinating and I'm just curious is it.
Paul tunnels going into does that does the desired location on just the <unk> caused by the shape charges that allows.
Reduced 20% reduction in Frac horsepower based on based on the field trials that you've seen or is it something else and just curious if you could peel back the onion, a little bit dark today I thought that was super interesting.
Yes.
It's both the alignment and and the.
Type of channels that the shaped charges are making that are.
Improving the performance.
The combination of.
Proprietary shaped charge and the size of that charge and the alignment and the accuracy of that alignment is what's really creating the.
Increased performance over other products.
Thank you all very much.
Okay.
Thank you on the next question is coming from Gerry Sweeney Jerry Your line is live please announce your affiliation and pose your question.
Hi, Good afternoon, Kevin Mike Okay.
Hi, Jerry.
Similar question, Tommy, but maybe a little bit different.
Last market cycle.
It was more about DMC, introducing the system's improving their effectiveness.
Coming into this cycle of new products now you have data on.
On improved operations, you're less shy of putting that data out. There then I think you were several quarters ago, plus a highlighted synergies.
What are the discussions with potential new customers in terms of getting them over the hump.
From a product I know theres nuances, even internally with some of the clients but.
A&P versus services.
I'm curious as to how thats developing especially with some of this data that you are putting out in terms of.
Cost improvements.
Yes.
First of all we're not trying to be all things to all people. We're trying to focus on a select group of companies in the market debt.
Understand.
The technological benefits, but also the business model benefits and and are focused on.
Total, creating total value for their customers through.
Less time greater efficiency greater end result in terms of.
Barrels per oil per day and and so.
In that the effort is primarily one.
Of educating people to understand what the total value proposition is.
Both at the exploration and production company, but also with our service company partners, who.
We certainly hope for our partners.
And so it's an education process.
At both because there is the end result, what it means to the safety.
Reliability operating efficiency of the completion itself.
But theres also a significant business model advantage to the service company because they are less people less facilities less working capital tied up.
In our.
Area of business than if they are working with others.
And so it is having them get comfortable with understanding.
Understanding that story.
And the data that we have that supports it.
And also being comfortable with us as a company that debt.
We are true partners were interested in their well being.
As well as ours.
And that we're medium to longer term focus rather than short term focused.
So.
<unk>.
That whole approach naturally lens.
On the dialogue.
And.
And partnership relationships with the leading people.
In the in the industry.
Got it.
Our sales moving more towards the A&P.
Getting specced in.
Obviously again cost savings they are seeing it.
You are very well known entity now.
Okay.
So so so we sell it.
Exclusively through our service partners, we don't sell direct to the E&P.
But we are seeing.
An increase in specifications coming from.
E&ps, where they're asking their service companies to <unk>.
Consider using our products, but it's very important debt.
We were interested in the health of our.
Customer partner service companies as well as our own suppliers.
And that the ecosystem is from us to the service company and the service company to the E&P.
Okay.
Couple more shorter questions or market size I want to say the last cycle 1 billion and $1 5 billion.
Obviously, you also introduced the Microsoft tool, which I think increases the market opportunity.
The market size gets back to that $1 5 billion.
Cycle.
With or without microphones.
I think it certainly does with Microsoft.
I think.
There is.
On multiple energy solution.
As we move forward.
I believe that our target market is important and sizable book in oil and gas.
Gas, we see increasing particularly in power applications, there will be probably some decreased consumption on the oil side.
This market the market should be smaller but in total very attractive.
And.
And so we would expect to return to <unk>.
Revenues that are are equal to or greater than where we were at <unk> 19.
And again, we don't compete on price, we tried to earn net revenue.
Through differentiated products that create real value for our customers.
And.
Okay.
And we're going to continue focusing on that.
What's represented.
By the patents that we've achieved this past year on the applications.
And so we expect the market to be a decent sized market and.
In 2023.
Be it smaller, but but probably tighter than.
And hopefully more profitable for our partners as well as our company.
Got it.
One last question. This is in the international side.
Yes.
The Indian tender with the thing that always pop up not so much recently, but is that part of the.
Push out on the international side, because that could be that could be a chunk of change on that.
I forget it.
Q2.
Yes, its various tenders.
The.
Middle East India market. So yes, it has been lumpy theres been some push push out there but again.
We expect as Kevin said for this business, it's a strong business with very strong margins and we expect it to be on track this year just slightly.
The gains in the first quarter, so we're not worried.
Got it I appreciate it thanks for taking my question.
Thank you once again and just generally if there were any other questions. Please press star one on Euro zone at this time and the next question is coming from Matthew Billings call. Matthew Your line is <unk>.
Hi, Thanks, good afternoon, thanks for taking my questions.
Maybe first Todd.
Tom.
Pursuing legal action against maybe competitors infringing on your IP.
To the extent you're willing to talk about on it.
What sorts of Al I'm, sorry are you looking for on that.
Hi.
Do you think about maybe distracting.
<unk> <unk> four per technology use or do you look to sort of just defend your position.
And I have a follow on.
Our model is not one of our licensing at least it hasnt been and.
And we.
We don't.
I don't want people to to copy that technology that we've.
Put a significant investment into developing.
In the first place.
And.
We need our customers to get a return on the technology that they deploy.
To get a return on the technology that we develop.
And.
There is no free lunch and we just want people to not.
Copy us and use their own technology.
Got it okay that makes sense and then.
It sounds like you had a little bit of.
Deal slippage on the cloud side of the business.
Sure.
Just expand on that a little bit on talk about.
Youre confidence on on those steel staying with you.
And what kind of delays on push outs are you anticipating.
We've seen push outs from anywhere from a quarter to two quarters for the most part.
I think it is important to highlight that our <unk>.
Backlog was up and going into 2021 versus going into 2020, and so we are.
You're seeing good activity.
Okay.
And we'd expect that to pick up later in the year also just just because of the uncertainty that.
<unk>.
Until economies get back to two.
To more of a normal times, we've seen delays in construction projects and particularly the large projects that noble club would get involved with.
Got it thank you.
Thank you there are no other questions in queue. At this time I would now like to hand, the call back to Kevin Lang for any closing remarks.
We appreciate everybody's interest in <unk>.
Our company and the work that we're doing.
We look forward to two.
Working with you and talking with you again as the year unfolds, we certainly hope that everybody stays safe from.
Pandemic and difficult weather.
With our Texas.
Friends and family.
And look forward to the next call on hopefully a stronger back half of this year as we get some of the difficult situations in the world behind all of us, but thank you for your interest in our company.