Q2 2021 Willdan Group Inc Earnings Call

[music].

Please standby as we are about to begin.

Good day and welcome to the World and group second quarter fiscal year 2021 Conference call Today's conference is being recorded.

And I would like to turn the conference over to Mr. Al cash chalk VP Investor Relations. Please go ahead Sir.

Thank you Jenny and good afternoon, everyone and welcome to hold and groups second quarter 2021 and earnings call.

Joining our call today are Tom Brisbin, Chairman and the board and Chief Executive Officer, Jim Earley, Chief Financial Officer, and Mike Bieber, President and COO.

Paul today and builds on our earnings release, we issued after market close today.

And in the earnings release, and it will day on Investor report that accompanies today's call and the investors section of our website will be on dot com.

Management will review prepared remarks, and then we will open the call up to your questions statements made and of course of today's conference call, including answers to your questions, which are not purely historical are forward looking statements.

Within the meaning of the private Securities Litigation Reform Act and thanks.

Good day.

The forward looking statements involve certain risks and uncertainties and is important to note that the company's future results could differ materially from those and any such forward looking statements.

And that could cause actual results to differ materially and other risk factors are listed from time to time and the company's SEC reports, including but not limited to the annual report on form 10-K for the year ended January 1.2021.

The company is cautious cautions investors not to place undue reliance on our forward looking statements made during the course of this conference call, which disclaims any obligation and does not undertake to update or revise any forward looking statements made today and addition to GAAP results. We'll then also provide non-GAAP financial measures that we believe.

Enhance investors' ability to analyze the business trends and performance. Our non-GAAP measures include net revenue adjusted EBITDA and adjusted EPS. We believe net revenue defined as contract revenue net of subcontractor services and other direct costs allows for an improved measure on the revenue derived from the work performed by our employees.

And.

And EPS and adjusted EBITDA are supplemental measures of operating performance.

Removes the impact of certain expense items from our operating results GAAP reconciliation for each non-GAAP measures included at the end of the earnings release, we issued today.

Patrick Tom's prepared remarks, Kim will provide a review of our financial results.

And then take your questions Tom over to you.

Thanks, a lot Allan and good afternoon, everyone. During our call inception on and I will provide an update on the current operating environment and Campbell and review our second quarter financial results.

Our second quarter results met our expectations expectations, given we are still in transition from the pandemic.

The restart of La DWP was June 21, 2021, our largest contract.

We also have PUC approval on all California IOU programs.

Company wide, we are not under any COVID-19 restrictions that impair our ability to do work on.

Of course, the ramp ups are challenging, but we are completely back to work.

We have been pleasantly surprised by how well our engineering segment has done during the pandemic.

We expected some effect, but we have seen steady performance and currently there is growing demand.

California construction is accelerating and our municipal customers are trying to catch up.

And our energy segment, we have resumed all programs and <unk>.

Approvals on the total $786 billion, California IOU program.

The program and status.

Our.

P G&A Pacific gas and electric and.

And new construction program valued at $98 million.

And it covers all new commercial facilities, we have PUC approval and notice to proceed and the duration is 5 years.

For <unk> public programs values at $9 million. It covers K through 12, all government facilities Federal state local and we have PUC approval a notice to proceed and the duration is 4 years.

And for San Diego gas and electric the small commercial program.

Its value and $42 million as for all facilities under 20 kw.

Have PUC approval a notice to proceed and the duration is 3 years.

For Socal gas and we had the large commercial program valued at 12 million we.

We have PUC approval the notice to proceed and its duration and 4 years.

For Southern California, Edison and the 1 and the last 1 we've been waiting for.

The large commercial program valued at $387 million.

The industrial sector valued at $155 million and the multifamily program valued at $82 million. We finally received PUC approval on all 3 programs utilities have committed to and notice to proceed by September 20, the duration for all 3 programs is 5 years.

So.

We have a big challenge before us delivering these massive programs.

We're confident based on our nationwide experience.

And has learned over the past 15 years data management capabilities exceptional people.

Experienced incumbent teaming partners and their desire to be the best firm and the nation gave us the confidence for excellent performance.

We expect $50 million and additional revenue over the next 12 months and $10 million and the fourth quarter of the year.

Turning to the law.

DWP program.

We originally expected this program to resume and March it is our largest program.

We are excited to report that the small commercial direct install program Filate resumed on June 28.

Of this year.

The program is ramping quickly.

Given the limitations and place related to the pandemic over the past 15 months led DWP did not spend budget for energy efficiency services.

We are in discussions with our client to discuss how to spend these programs.

Over the near term, which would be additional to our baseline program pre COVID-19.

And our first month of operation on led DWP the month of July.

We're nearly met our pre COVID-19 run rate.

This is an excellent startup.

You to all the staff they have been preparing for the restart and the staff that are returning from furlough.

We expect this team to meet the challenges of a rapidly growing program.

We are encouraged by the growing pipeline.

Hello, Dan and diverse capabilities are driving more and more larger opportunities.

Our pipelines and backlogs are at record highs and the <unk>.

Market is growing.

And the last couple of months asset managers have announced a massive climate related fund rates and to invest and the energy transition transition.

All things zero carbon such as renewables wind and solar and battery storage EV charging distributed energy resources.

On the words of today.

Brookfield, just announced a 7 billion dollar funds and TPG 5 for Copenhagen, and infrastructure partners and $8.4 billion Blackrock 4 billion.

And what's behind us.

Expectation of returns and this space is growing.

Development risks are better understood.

The policy signals are aligning and we foresee a future where just about everyone as a net zero target on energy.

So theres and awareness.

And that there is a much greater total addressable market.

It appears climate related investing and has made a big step change up from just a specialty market.

Well, Dan as well well positioned for this future.

We navigated well through the pandemic, we did not lose any key capabilities or contract value now and less deliver and get back to the growth rates that our shareholders expect.

We are emerging a stronger post pandemic company.

Thank you to our shareholders and employees for their patience and understanding.

We will now turn the call over to Kim to discuss our financial results Jeff.

Thanks, Tom and good afternoon, everyone.

Our second quarter results reflect the transitory phase from the Covid pandemic suspension due to the resumption of key programs and the preparation and start of the expanded opportunities and as the new California IOU programs.

Gross revenue for the quarter was essentially flat with the same period, a year ago, but net revenue net of sub contractors materials and other direct costs was up 9.4%.

While our direct install revenues recovered substantially from the suspension and put in place a year ago. Those gains were partially offset by reductions and performance contracting revenues and those activities were transitioning from completed projects to new projects, which should start to show and anticipated increases beginning and.

Q3.

Gross profit margin increased to 36, 7% and Q2 of 2021 compared to 35, 4% and the quarter a year ago, reflecting the change and the revenue mix and the results of efforts to improve productivity and margins across our direct install businesses.

G&A costs were $4.6 million or $13, 7% higher and in Q2.2021 compared to the year ago quarter.

Last year's second quarter, G&A costs reflect the wage and staff reductions implemented during the early stages of the pandemic suspension.

This lower base period accounts for a majority of the $3.4 million rate increase and salaries and wages compared to a year ago, along with some increased staffing and non chargeable labor and anticipation of the new California, IOU contracts and other organic expansion opportunities.

Stock based compensation and other G&A costs were partially offset by lower depreciation and amortization to account for the change and total G&A costs are.

The higher SG&A costs were partially offset by the higher margins and net revenues, resulting in adjusted EBITDA for the quarter of $3.3 million down from $7.2 million and Q2 of 2020.

Our adjusted earnings per share were <unk> 24 per share for Q2 of 2021 compared to <unk> 17 per share in 2020 up 41% year over year.

For the 6 months to date gross revenue of $163.2 million was down 13, 9% compared to a year ago, but net revenue increased by 2.6% to $95.2 million.

The gross revenue reductions and our direct install and performance contracting businesses translate to a smaller reduction and our net revenue due to the Hyatt sub contracting materials content, while the gross revenue increases from integral analytics software and <unk> consulting and advisory revenues have low pass.

Through expenses, and therefore translates to a higher increase and net revenue.

Thus the change and mix of revenue sources as a result of the pandemic suspensions and the sharply higher software and consulting revenues accounts for the different trajectories of gross and net revenue through the first half of the year.

That change and mix also accounts for the 680 basis points improvement and gross profit margin year to date, when compared with the same period and 2020.

The increase in gross profit was partially offset by a $1.9 million increase in G&A costs versus a year ago, primarily due to those wage and staffing staffing reductions implemented in Q2 of 2020, which relate to restored.

The net effect of those changes resulted in adjusted EBITDA of $8 million for the first half of the year compared to $8.5 million and a year ago and adjusted earnings per share up 43 per share compared to 4 and 2020.

From our perspective.

Since the lead AWP program that is now resuming the regulatory approval of the SCE contracts and several other new program and project opportunities. We expect the second half of 2021 to report substantially improved revenues and earnings.

This we believe will set the stage for reporting the more sustainable growth and earnings capabilities of our business model and for achieving a record year for revenues and earnings in 2022.

The changes and our balance sheet and cash flow reflects the changing mix of revenues described earlier, along with the impact of gearing up for the start of the second half expansion.

As we expected our cash balance has been reduced from $28.4 million at year end to $9.4 million at the end of the second quarter.

Cash used in operations was 708000 for the 6 months period as the working capital expansion required by the program and startup costs and some temporary customer payment delays combined to offset the cash generation from revenues.

Scheduled principal payments on our term loans earn out payments, resulting from successful acquisition performance comprise the majority of the $15.2 million used and financing activities and $3 million and capex comprise the remaining cash usage.

Our $50 million line of credit and $20 million of available delayed draw term loans remains unused quarter and we.

We do expect however that the restart of the led DWP small business direct install program and the commencement of the new SCE programs and Q3 will expand our working capital requirements and results and usage of the lines of credit and Q3.

And would expect to continue to use that line until the cash flows from the expanding revenue begin to catch up in 2022.

I'll now return you to Tom for any questions.

Thanks, Kevin.

We haven't any questions and our Q.

And thank you.

Like to ask a question. Please press star 1 on your telephone keypad.

And please make sure that your mute function is turned off to allow your signal to reach our equipment, if you're on speaker phone.

Again, just wanted to ask a question.

And we will go to our first question in the queue from Craig Irwin Roth Capital partners.

Hi, good evening, thanks for taking my questions.

And Tom.

We all understand day, the Kobe transition and I.

And I guess, everybody and elas kind of breathing a sigh of relief now that they are a little bit more normalcy.

So.

Obviously, a good thing and and great to be back at work and led DWP.

Can you clarify for us whether or not there was any California revenue.

In the quarter were in the first half.

And.

I don't know, if you can approximate or or or estimate the contribution but.

The numbers and you talked about earlier, I think $10 million and the fourth quarter was 1 of them.

Can you just confirm that.

Entirely led DWP or California or.

On a mix of contracts.

We have and that Theres, no, California, IOU and our first half.

We don't expect and not from lease program. After today's program the new program a new program.

I think that was just a question on loves that.

Yes, correct.

Yes.

And the turn will come from.

Hopefully it can and will come from the California, IOU and desktop from DWP.

And that I referred to.

Okay understood.

So with the Covid headwinds.

Headwinds or is it is it fair to kind of.

A more tight.

Scope that you've won over the duration of.

Of the contract and say that that's going to get us to an approximate run rate in 'twenty 2 and that's.

Reasonably accurate or.

<unk> relief programs sort of buildup into the final year.

The programs.

I would say, it's going to build towards the end of 'twenty..2 it's can be figure out twice 3.

It's got a and B price figure out 24 and hopefully.

The program 5 years from now.

<unk> Sir.

Starts to or it looks like it might come through and and we don't want to just hit a wallet or.

The greatest run rate, we would like to be ramping down and that fifth year not too much because we anticipate.

And there'll be a recompete and.

And if our performance is a plus and we will be and they are fighting to continue for another 5 years.

Also got to think about Craig that.

We are at about and you know this.

These numbers, though and I do probably 30% to 5% to 40% outsourced and over by 2025, they've got a hit to 100% outsource.

And so.

And with good performance, we anticipate these programs to not only continue.

When the Recompete, but growth.

5 years out.

Understood understood. So I'm kind of hoping that we're still ramping in 2025.

And then.

And that it'll be the initial program. So my question really is.

Wait wait Craig and I can't say that because of the utilities.

And would think debt we think.

And that will help us and we've got a plan for our contracts as you may or may not win so you don't want to be.

Hi, and you ramp and the fifth year, you want to be.

Some reasonable number.

Yes understood understood. So there's still quite a lot of business.

To be outsourced right.

And have won and outside share Inc.

And the awards have been quite late which all of us expected and the first place.

Do you think it's likely we see material movement on the next round of awards before the end of the year.

Where can you say you are and the RFP RF Q process for those incremental opportunities.

And just given given how the timelines this come together for the work that you were awarded this year.

Would you expect those projects to be in full execution mode.

Before you before you see the next round of awards.

Yes.

I mean, I don't think we'll see that beginning of what's called abstracts, Rfps orally and awards.

And on the end of 'twenty, 2 and 23.

I mean, everybody is trying to wrap their head around this the included and utilities.

Thereby there might be specialty programs, but in terms of the overall large programs.

Uh huh.

I would say the end of 'twenty 2 'twenty 3 domain at 25 goal something like that correct.

Okay, and then it could even media and a 23 before we start to see something.

Okay and on California.

The potential scope right. If we do some some back of the envelope math and.

And we say a little bit better than the third.

What was handled.

And they were maybe 20%.

Outsourced and you still got.

Maybe how does the $1 billion, a year and in energy efficiency spending and California.

B.

We outsourced.

Yeah.

And you expect I mean, we've been doing 5 year contracts would you expect there to be.

And so.

A couple of billion dollars and in future activity.

Is that really the size of the probable procurements that we'll see.

The next 2 years.

I am not speaking from utilities, but I mean.

We think there could.

We could grow the value we're looking at now by 50% by the end of 'twenty 5.

With excellent.

Excellent performance.

But what the utilities are going to do.

You know that mandate as well as I do.

And so it's a 40% number and they got a hit on 100% number by 2025 do the math.

2.5 times times that $800 million gives you $1.6 billion.

A little bit more of a $1.8.

<unk> CFO and I can add.

Hi, Jeff and me for that.

So yes, there is significant work left to be done.

Okay.

And you're still there and Greg.

Did you have something else for Greg.

No I just wanted to let them know debt. We also see this type of growth and <unk>.

Other parts of the country.

And I alluded to the fact that this is.

Subject is heating up and.

Our pipeline is good and New York and.

Other parts of the Midwest. So you will see announcements over the next few months.

We're doing quite well on our backlog and pipeline.

But that's for Craig and we're on to the next question and.

We'll go to our next question from Moshe cadre of Wedbush.

Okay.

Thanks for taking my question.

And you guys are all good.

On.

And that's worried about the pipeline and on my words more about.

The first day and ability.

The net.

Flow of business, that's coming through.

Mitra from Burnley.

On.

Especially given what.

California may be.

And of course going from call to deal with that down the road.

So your thoughts on.

What I.

And then how are you guys kind of getting set up for that especially with the LBW contracts in terms of on.

Personal installment that's number 1.

Our focus continues to be more on the operational side and the quoted the talent and wearable.

And so kind of deliver these contracts on time and on budget.

And you can talk a bit about some of the lessons learned during the pandemic. How are you getting set up and then.

And maybe you can talk about on.

About wage inflation, and what sort of which comp increases from here.

Set up work from embedded and the model looking on to the next year and Thats, where given the elevated.

Walter avoids equation and across the board Thanks, a lot.

So it's about 3 parts there.

Michael do wage inflation and other parts.

Try to take on some of the lessons learned during a pandemic which is virtual.

Selling and virtual audits.

Do it yourself install the best and I haven't.

Cover all of what we've got to do so free.

Did get shutdown and again completely we would experience the same thing.

We have no magic bullet, which might be able to pick up 20% and theres no magic bullet to a 100%.

And where are we.

And we don't anticipate that now.

I mean Moshe do you know something we don't know.

Well not exactly.

Hi.

I mean are you expecting that L. A on close again.

And the extent debt.

And I wanted to look on what heartworm no I'll go on those.

1 item, Australia also I don't know.

Yeah.

Well I don't have an answer for that other than we have learned lessons how to do some virtually.

I'm sure that if we get shut down again, we can pick up enough to get through it again.

Unfortunately, we won't hit those growth rates that we would love to hit with where we're looking at now but I'm just to be very candid that you can hit.

You can't deliver the backlog we have closed.

So.

Theres no sugar coated.

And how about wage inflation and what's embedded in the models.

A lot of our clients are a lot of our contracts have escalators in them.

We're seeing wage inflation.

Coming in and the new hires we are hiring quite a number of people right now and you can see we've got more than 100 open positions on our website at this point so we're rapidly staffing up.

And we're seeing you know more than 5% wage inflation overall.

And that varies by the type of talent and you're trying to hire and other things we don't hire.

Typically at the lower or less educated levels most of our new hiring is done with.

And with advanced degrees.

Our college degrees and.

So in some parts of the country frequency and higher than 10% wage inflation.

But in general we are able to pass on those costs through our contract mechanisms motion.

Okay. That's helpful and then.

We obviously with things coming back on the stimulus.

No.

And the trend continues.

And you kind of give us some maybe just some broad guidance on and now long terms and in terms of what what do you can do.

On the non-GAAP margin and.

The business could be down the road, assuming that things picked up and we don't have any issues with.

Kind of people sitting on the bench and on the utilized it pops up.

And we kind of go back to somewhere on that high teen level will be at the higher.

And that's exactly right we were at 18.

18, 5% pre COVID-19.

And that's adjusted EBITDA as a percentage of net revenue, which is the metric youre referring to.

We would expect to at this point now returned to pre COVID-19 levels. So in that 18 ish percent.

And then growth from there because that number was partially being driven up over the last several years.

Our back office cost absorption and now we have the backlog to drive this well beyond $500 million per year, which we've never experienced that would be record record revenue growth and so I would expect the margins to slowly creep up from from net pre COVID-19 level of roughly 18%.

Okay.

And so on.

As a reminder, it is star 1 on your telephone keypad. If you have a question and at this time.

And we will go next to Marc Riddick of Sidoti <unk> Company.

Hey, good afternoon.

Hi, Mark.

So I wanted to circle back to.

So the path you seem to be setting with the commentary around.

And the potential for order flow and and some other areas that are looking promising and I was wondering if you could talk a little bit about to what extent if any.

That is driven by.

Sort of you know state local funding mechanisms being supported a federally or.

That's part of those conversations are alright.

Without getting into too much detail, but what you can sort of share as to maybe some areas that that your that your policy and that's about as far as being able to build the pipeline and then I have a follow up after that.

We have Brian considerable new work that we'll be announcing.

And let's just call it housing multifamily housing.

Low income housing.

That will benefit tremendously from any federal stimulus package.

Both and just infrastructure upgrades as well as you know.

Energy.

That is new and what's that completely new but it's growing with and will that and.

And you will see announcements and the.

And do you think next month or 2.

Next month or 2 and then what.

Does that work.

Which is already.

<unk> got more work behind it and the stimulus comes.

It's something that we didn't think we would benefit from.

6 months ago.

And now we are more optimistic on.

Okay.

And that money its focus and it might actually get to the people who need it.

And so it's a very encourage and thank you. Thank you for that I was wondering if we can shift gears I know, there's certainly and first of all thank you for all the detail that you provided on your your initial commentary and in and sort of where you are and it certainly seems as though as you're going through that process and transitioning to the opportunities. It's.

Going about as smoothly as 1 could ask for.

I was sort of curious as to is it possible and think about the prospects and we're looking at potential acquisitions down the road or are there. Some service areas that you think that would be complementary to those opportunities are or how should we how should we think about that.

Yes.

Sure Mark.

We won't resume acquisitions until sometime in 2022, we'll get the leverage down and get these California programs up and running first.

We are starting those conversations we've had a few of them now.

There are several areas that we would like to add the.

And the last is to pick up where we left off.

We acquired 1 company and the industrial space.

Which is 40% of the market, but less than 5% of wilderness. So that space is wide open for US there are a number of good opportunities out there in the industrial space, which would also help diversify us a little bit and hedge against the utilities, which is now creeping up and over 60% of our portfolio.

So industrial first electrical engineering second that's a good area.

And we're able to higher electrical engineers, it's been tough to find the right size of the business and that area.

There are a few out there we would like to make an acquisition there and.

And lastly, I would point, we're getting to a size, where we would also like to.

Make a.

And acquisition and the federal space.

And the other area that I.

I would say we would like to follow up on actions. We've already taken is and the policy space. We've acquired E..3 right before the pandemic and October.

And there are a number of other opportunities there on the policy advisory space as well.

Yeah.

And so very encouraged and thank you very much.

And we will go to a follow up from Craig Irwin of Roth Capital partners.

And thank you.

So I guess this is a question maybe for Kim right.

Modeling is it's always difficult for welding and I guess, it's really hum.

Function and the nature of the business.

But if you look at the at the analyst models and consensus numbers for the third and fourth quarters. Obviously, you know at least my take is that there needs to be and adjustment.

Can you maybe help us think through what the appropriate revenue expectations would be.

What the major puts and takes on.

And for us to get the numbers right.

Given that we are basically starting up and California.

But there are expenses related that with that that don't have margins with them yet.

And.

The other basic puts and takes to.

To get on models, a little bit more precise.

Well I'm not sure have a habit.

And how to answer that I guess I guess.

Definitely yeah, Mike Vesey, and you've got some guidance so Tim starting to abate because I figured I have your model in front of me.

And Craig So let me distinguish commentary on can provide.

On the net revenue side.

Models are a little higher than our internal plan, but not that far off.

The Q4 earnings number is.

Higher than our internal plan.

And I think that is because people are modeling in our models and the.

Contribution of the new California, IOU programs in terms of earnings in Q4, and that will actually hit until sometime in 2022.

The California program won't contribute.

And earnings they will not contribute to earnings and this fiscal year there'll be a drag on earnings because we will have startup costs, but then you'll see that pretty rapidly rollover in 2022 and.

And dropped straight to the bottom line that would be earnings and cash flow.

I think the disconnect is probably in this.

When you have the California program, starting and it'll be.

Basically 3 to 6 months later than most of your models and that Q4 number is probably the 1 that you need to take a look at.

Perfect Perfect and then just as a follow up question.

1 of the other factors that contributed to significant lumpiness.

And EBITDA and EBITDA margins has been software sales from <unk>.

And to grow analytics.

Do you have any software sales and your internal forecast is it fair and we expect 1 or 2 contracts by the end of the year.

Or should we strictly treat that as upside and I guess the other side of the question is has the pipeline changed and.

And is there an update you can give us.

Yeah.

Integral analytics has had a good year, thus far and and we think and the next 6 months is going to have and even better year Youre right I would expect another 1 or 2 deals thus far we've factored those down and our internal plan, but I.

I think there's some upside there for all of us that pipeline looks really good.

And they continue to gain traction with the big Ious.

As more day ours are coming on.

And making the grid much more complex you really just cannot do accurate forward forecasting on spreadsheets as most of the United States does at this time.

And the way to get around that is to adopt integral analytics software.

So the pipeline looks very good.

It continues to improve and.

And they're gonna have a great year.

Excellent well, thank you and congratulations on on the.

And final approvals of your California projects, Good luck and the next round.

We look forward to the progress next quarter.

And we'll go to a follow up from Moshe <unk> of Wedbush.

Yeah.

Thanks Joseph.

To confirm if I heard it correctly.

And we couldn't really recognize any revenue from software sales this quarter and my correct.

That is correct Moshe we had none in Q2, we had the software license with PGA day, we announced in Q1, but nothing in Q2 correct.

Right.

And maybe you will see some sign on during the next 6 months and.

Can you talk a bit about what's going on there I conclude 1 through.

There'll be a restructuring on the sales force last year.

I don't know, maybe Tony compensation, but the product looks great, but we're yet to see any sort of meaningful results from that part of the business.

We'll be can talk a bit about that because obviously that.

This will give you a pretty decent growth.

And the profitability with the something debt.

Yeah, and Moshe we've made a number of changes and the software business and the last 24 months, you and I've talked about some of those you're right, we've restructured and not only sales, but EBIT even development services.

And we've hired a number of new people and that business.

We are trying to move from what was historically large lumpy deals too.

More compartmentalized for.

More annuity based sales and.

And those would be smaller deals that are more incremental and less lumpy.

And I think youll see some of that come in and the back half of this year and a couple of deals we're working with right now.

We're also doing a lot of and collaborative development with <unk>, There's a meeting going on to date and in fact on a brand new service offerings that theyre working on called short term forecasting.

Which we're excited about and hope to and have more announcements about and that's being discussed.

Yesterday.

So I believe that we will have its first meaningful contribution to earnings will then this year, it's been a long time coming.

And we love the margins coming out of that business. We also loved the technical differentiation.

And do not have substantial.

Competition and the marketplace competition is really from inaction, so we're highly differentiated and.

It's a great business, we'd like to invest more there.

Okay, and then final question on my side as you're ramping the business with the utilities or.

And with California and in general.

Could there be and impact on Dsos is there are there.

Or are there kind of claim and cycles relative to the rest of the business.

The new contracts are going to have a little more extended.

And.

Capability or requirement for working capital. So the terms on a little more complex, maybe then and.

Some of our earlier contracts with some of the parameters have on.

Quarterly true up.

So.

And the DSO is likely to go up.

And the working capital requirements are likely to go up a little bit.

But but.

But not radically so.

Understood. Thanks.

Yeah.

And with no other questions on the queue I would now like to turn the call over to Tom Brisbin CEO for any additional or closing comments.

Well. Thank you for all your questions and interest and thank you for the shareholders, who are listening or will listen and we.

We expect post pandemic, if we're really there and Moshe if you're still listening.

And we live and the most close city here in L. A but.

We expect to really get going on and stay there and <unk>.

Delivered to all of you and what we promise over the last 3 or 4 years. So.

We hope this all comes to it and to pandemic and we can get back to work.

So thank you all.

[noise] and concur.

Concludes today's call. Thank you for your participation you may now disconnect.

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