Q4 2021 Cactus Inc Earnings Call
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Good day and thank you for standing by welcome to the Cactus Fourthquarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. After this presentation. There will be a question and answer session Classic question. During the session you will need to press star one of your telephone.
Please be advised that today's conference is being recorded.
You want any further assistance. Please first started here I don't know like the hand, the conference over to speak of the day, John Fitzgerald Director of corporate Beth and I are please go ahead.
Thank you and good morning, everyone.
We appreciate your participation in today's call. The speakers on today's call will be Scott Bender, or Chief Executive Officer, and Steve Tadlock, Our Chief Financial Officer.
Also joining us today are Joel Bender, senior Vice President and Chief operating Officer.
Steven Bender, Vice President of operations.
And David Isaac Our General Counsel, and Vice President of administration.
Please note that any comments, we make on today's call regarding projections or expectations for future events are forward looking statements covered by the private Securities Litigation Reform Act.
Forward looking statements are subject to a number of risks and uncertainties many of which are beyond our control.
These risks and uncertainties can cause actual results to differ materially from our current expectations.
We advise listeners to review our earnings release, and the risk factors discussed inner filings with the SEC.
Any forward looking statements. We make today are only as of today's date and we undertake no obligation to publicly update or view any forward looking statements.
In addition, during today's call, we will reference certain non-GAAP financial measures reconciliation to these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and with that I will turn it over to Scott. Thanks, John a good morning to everyone our business improved materially during the fourth quarter.
And I was particularly proud of the returns achieved in our product business line in light of supply chain challenges is mentioned on our last earnings call. We made a conscious decision to proactively AD inventory and people, believing that activity games were on the horizon. As a result, we are now well positioned to capitalize on further growth.
In our industry.
Some fourthquarter highlights include revenue increased 13% sequentially outpacing the game the U S land rig count adjusted EBITDA improved by 14% sequentially. Adjusted EBITDA margins were 28 per cent up 50 basis points versus the third quarter.
We paid a quarterly dividend of 10 cents per share and we ended the quarter with 302 million of cash and no debt following the quarter due to our financial strength and performance to the cycle or board increase a quarterly dividend by 10% to 11 cents per share and I'll turn the call over to Steve Tadlock, Our CFO , who will review our.
Financial results. Following his remarks off provide some thoughts on our outlook for the near term before opening the lines for Q&A, Steve. Thank you Scott mentioned queue for revenues of 130 million were 13% higher than the prior quarter product revenues of 84 million, we're up 12% sequentially.
Driven primarily by an increase in rigs followed product gross margins at 35% rose approximately 100 basis points sequentially as continuing cost recovery efforts to reduce the impact of inflationary pressures across the supply chain.
Rental revenues were 19 million for the quarter up approximately 26% versus the third quarter of 2021, and gross margins increased 11 percentage points sequentially due primarily to lower depreciation as a percentage of revenue.
Field service and other revenues in queue for where $27 million up 7% versus the third quarter of 2021.
This represented 26% of combined product and rental related revenues during the quarter.
We expect field service revenue to remain approximately 26% of product in rental revenue in the first quarter of 2022.
Gross margins, where 18.1% down 470 basis points sequentially with the reduction largely attributable to the seasonal impact of the year and holidays lower utilization associated with the aforementioned new hires and overtime required to meet increased activity levels as contributions from our new hires take time to materialize.
SG&A expenses were $12.9 million during the quarter point 7 million versus the third quarter. The sequential increase was primarily attributable to higher payroll related cost driven by employee benefits and a higher bonus grill.
S G and a expenses declined to 9.9% of revenue down from 10.5% during the third quarter of 2021, we.
We expect SG&A to approach 14 million in Q1, 2022, inclusive stock based compensation expense of approximately $2 million.
Fourth quarter, adjusted EBITDA was approximately $37 million up 14% from 32 million during the third quarter of the year.
It just did EBITDA for the quarter represented over 28% of revenues compared to 27.7% for the third quarter.
Adjustments to EBITDA during the fourth quarter of 2021 included approximately $2 million in stock based compensation.
Depreciation expense for the fourth quarter was $8.8 million a similar amount is expected for the first quarter of 2022.
We reported income tax expense of $7.1 million during the fourth quarter, which was inclusive of $1.3 million in income tax expense related to the reevaluation of our deferred tax asset.
The fourth quarter also included 1.9 million in other income related to the revaluation of our tax receivable agreement liability.
During the quarter, the public or class a ownership of the company average, 78% and ended the quarter at 78% barring further changes in our public ownership percentage, we expect an effective tax rate of approximately 22% for Q1 2022.
GAAP net income was $20 million in queue for 2021 versus $17 million during the third quarter with the increased driven by an increase in operating income.
We prefer to look at adjusted net income and earnings per share, which were $18.7 million.25 per share respectively. During the fourth quarter versus $14.7 million.19 per share in Q3, adjusted net income for the fourth quarter excludes 1.9 million in other income and apply that 27% tax rate toward just did pretax income <unk>.
<unk> during the quarter, we estimate that the tax rate for adjusted EPS will be 27% during the first quarter of 2022.
During the fourth quarter, we paid a quarterly dividend of 10 cents per share, resulting in a cash outflow of nearly $8 million, including related distributions to members as stated earlier. The board has now approved a dividend of 11 cents per share to be paid in March.
We ended the year with a cash balance of $302 million for the quarter operating cash flow was approximately 12 million Internet Capex was 3 million inventory rose by approximately 19 million sequentially due to the doubling of inventory in transit caused by logistical headwinds increased trade costs and the previously mentioned strategic decision to.
Increased safety stocks. This leaves cactus in a strong position enables to respond to increased industry demands, while affording us better margin protection.
Working capital outflows are expected to moderate in Q1, which should benefit cash flow relative to the fourth quarter.
Capital requirements for our business remain modest and we will continue to exercise discipline with regards to growth expenditures are Ned Capex guidance for 2022 is 20 million to $30 million. This is inclusive of an extended R&D facility enhancements to our bowser facility and additional drilling tools and digital related rental.
Assets.
We expect some of the larger ticket items to occur during the first half of the year that covers the financial review and I will now turn your back to Scott. Thanks, Steve as previously mentioned, we reported sequential revenue growth across all of our revenue categories. During the fourth quarter with total company adjusted EBITDA margins at their highest level of the year we were.
Ported market share at 42% during the period with most of our rig editions coming from public operators during the quarter product EBITDA margins improve by 90 basis points in the fourth quarter and incremental product EBITDA margins or above 40% during the period.
Look into the first quarter of 2022, we anticipate cactus is rick's followed to increase by at least 10% as customer budgets of reset public operators have modestly increased drilling activity after seating share their private companies. During the last two years. Nonetheless, we still expect privates to contribute to the majority.
Of regains and to a lesser extent wells drilled.
During the first quarter of 2022 product revenue is expected to increase at least 5% sequentially and we anticipate product EBITDA margins to be up approximately 100 basis points commodity prices remain supportive of continued rig activity increases while margin performance will be a function of our ability to manage inflationary.
Cost pressures.
Rick efficiencies into declined in recent months due to the service industry supply chain disruptions and the mix of our activity gains across customers and basins.
On the rental side of the business revenues increased by over 25% during the fourth quarter outperforming the modest gains in overall domestic completion activity, we achieved modest rental growth in the middle east during the fourth quarter as well domestically the supply and demand dynamics continued to improve which bodes well in the middle east equipment to pull.
Limits of increase in recent weeks following a pause and activity to start the year Importantly, we were formerly approved as a vendor for a ramp Cohen February which will allow us to pursue additional opportunities.
For the first quarter of 2022 revenues and our rental business line are expected to increase by another 15% EBITDA margins or anticipate are anticipated to be in the high 50% rage during the period.
In a market where the service industry may begin to struggle meeting the needs of the E. PS due to equipment and labor shortages are imputation for reliable equipment safety and service execution continues to separate us from our peers.
And feel service revenues continued to be driven by both our product and rental activities.
Revenue as a percentage of product and rental is expected to remain at 26% during the first quarter labor right inflation as well as labor as low as well as lower labor utilization due to employ onboarding represent a headwind to margins. However, we still expect field service EBITDA margins to increase into the mid.
Hi, 20% range during the first quarter provided the rite of personnel additions moderates I'd like to close our prepared remarks by highlighting a few key points.
We are expecting our first south American product equipment shipments to occur during the first half of this year. In this instance, we're supplying equipment to a major international operator, this demonstrates our ability to expand geographically with limited capital requirements regarding the Mideast our efforts to our efforts to penetrate this market continue.
Q as we've progressed our efforts to secure trial orders and markets, where we believe there are prospects for reasonable margins.
There's been no change to our position regarding M&A, our view regarding consolidation within our industry has not changed while opportunities beyond our car. Our core offerings have increased our team will carefully monitor and evaluate such opportunities to the extent they become available and <unk>.
January we were pleased to announce a 10% increase in our quarterly dividend right to 11 cents per share. This was our second such increase in less than a year and demonstrates our commitment to returning capital to shareholders. We continue to evaluate our capital returned strategy on a regular basis and remained highly aligned with our shareholders.
Given the management team significant stake in the business.
In summary, cactus remains optimally positioned to succeed in the current industry recovery and is focused on maintaining our excellence and safety technology service and execution and with that I'll turn it back over to the operator, so that we may begin Q&A operator.
Thank you as a reminder to ask a question you would need to press star one of your telephone to withdraw your question press the pound key.
We ask that you please limit yourself to one question and one follow up.
Our first question comes from David Anderson with Barclays. Your line is open.
Hi, Good morning, Scott.
Hi, David how are you I'm doing well I'm doing well. So a question about Bozos should I think you were mentioning putting some capex of that facility.
So if I go back to having 2019 I think your your manufacturing was something like 60, 40, China and Bowser I noticed kind of edge back in recent.
Over the last couple of years. So how do you think about this kind of going forward do you think this is going to be more of a secular change, whereas an increasing advantage to have more local manufacturer at least two bolger and kind of building out that mode and maybe you can just expand all about some of those some.
Capex, you're spending if you wouldn't mind.
Providing a few more details thanks.
David.
I think the problem that we've had we had anticipated mosier might assume a larger role in our manufacturing profile, but business increase to the point, where it was sort of folly to expect that to happen. So we we continue to rely pretty heavily on our soochow supply chain.
The editions that are taking place in Bowser right now are more related to our ability to process incoming goods from the far east as.
And as well as Frack valve repairs as opposed to new manufacturing, we we still have some capacity to manufacture, particularly for these gap or parachute orders. So I wouldn't look for anything.
Significant in terms of our manufacturing profile.
And then you talked about the kind of supply demand.
Getting much better than in that rental business and clearly it's starting to pick up I was just curious in terms of Capex I guess last time, we were talking about this was back in 2019, I'm just kind of curious kind of when that starts to become a question in terms of your capacity and secondarily I'm just curious does that rental.
<unk> capacity change I mean completion technologies and completion techniques have evolved with some things like cymose rack I am just curious it is there something that needs to be upgraded or like a new type of equipment that you have to invest in just a little bit more details are on that market. We don't we don't hear a ton about that so I'd love to learn a little bit yes. So we're not seeing a whole lot of sign will frat.
Activity not enough to to really change our strategy and.
In answer to your question, Nevada hasn't changed our equipment offerings, I'd say not to any significant extent.
Beyond that.
The supply demand dynamics are improving and I think we all believe you noticed that we've raised art capex expectations till the 20 to 30 million dollar range I mean.
Clearly as things stand out at the lower of that $20 million to $30 million range, but fingers crossed.
We're expecting anticipating hoping that will begin to have to add some large for 15000 PSIG valves as we move into the second half of this year.
And as a result, we also believe that this might finally.
Put some pressure on our competitors to maybe.
Be more realistic and their pricing.
That's what I was gonna ask you as well so it's so pricing is is a consideration in that.
That calculation, obviously in terms of yeah, we're not going to add assets unless we see the pricing has improved.
Thanks, a lot I appreciate it thanks David.
Thank you. Our next question have tastes mobile with Bank of America. Your line is open.
Jace.
Hey, good morning are you done.
Can you speak up a little bit.
Yes.
Is is better or worse as.
Is better.
Alrighty I'll try to be loud I get about your Ponzi and hopefully that's not it but I guess the first question.
We keep hearing a lot about supply chain friction on the completion side, whether it's trucking or sand.
And we heard about some pressure bumpers.
Some rough fourth quarters, and some of that kinda continuing into the first quarter.
And just miss and you're being slow with some jobs because of the supply chain constraints.
Could you talk to if you're seeing that out there on the completion side, obviously your revenues were up.
Strong and on the rental side, but what do you see in from you know friction out there on the completion side and do you think that this could actually hold back completion activity as you look over the near term.
Hey, Jason Steven.
We're certainly hearing about issues the trucking and sand maybe we're just fortunate that the clients for whom were doing business haven't been constrained by that so far but.
I think that it's probably just going to continue to get worse through the first quarter, but so far we haven't seen it affect our clients.
Okay Alrighty perfect.
Follow up is <unk>.
You seem pretty constructive Oh near term big activity, basically, saying that the cadence of rig add should continue.
But as we tend to look out to the back half you know what kind of visibility do you have you know what are your thoughts on back half activity and and you also want a number out there and that'd be curious on your thoughts and do you think we can add another hundred horizontal rigs between now and the end of this year.
Whoa.
[laughter] casually alright.
Will there be a desire to do so I think there will be a desire to do so can we is another question entirely I think that.
We all know that there are some.
There are some of the significant supply chain constraints right now.
We're hearing all sorts of horror stories from our customers.
The story about Tubulars people are struggling struggling to get the right tubulars on time, they ever happened to make substitution.
We're seeing some rig efficiencies begin to deteriorate, which.
It could be attributed to several factors I'm, probably going to answer I'm, probably going to expand my answer beyond your question part of that of course is the basins different basins have different.
Efficiency profiles for example.
The mid card slower drilling then perhaps south Texas.
Or the northeast slower drilling then the Permian, but.
I think it's.
Our view.
Things at the rig site have slowed down all things being equal strictly because of problems with personnel.
Take downs it's.
I think the industry is a bit stressed right now so.
When I look at for example, our customer profile, we added I guess I can say this you know most of our editions during the period where for majors, we finally turn that around.
To a lesser degree from private I think the majors will probably.
Slowed down their rig additions in the second half of the year I think the privates will probably.
This level of oil add as many rigs as they can but the privates are also is you know no surprise less efficient less which translates for us into less wells per rig per month. So.
That was my long winded way of saying that.
So I think that there's a desire for 100 rigs I don't think I don't.
Suffice it the industry can handle it right now with the same level of efficiency and you say majors, you really referring to the public yes, I'm, sorry, I'm at publics yeah.
Perfect I'll turn it back over thanks Scott.
Thank you. Our next question comes from scuba with Citigroup. Your line is open.
Morning.
Are you doing.
Well doing well so the rental businesses is starting to turn which is good to see you.
You guys, obviously seeded shared rental during the last downturn when prices were just not attractive.
And we got the Guy for one Q, but beyond once you should we expect double digit type growth continuing for a few more quarters in that business, especially given the.
Step up in Capex.
I would say, yes, given what we're seeing right now.
Got it.
Good good good and then just looking back at the profitability of business near the one Q Incrementals, you'll look solid.
But when I was looking back at 2018 19, the second average about about 70% margin.
And I know, there's a lot of puts and takes.
Today, but.
We look at a few more quarters.
Think about the large improvement this cycle.
Is that level of profitability achievable again.
We're talking about a rental I help you say, 70%, yes rental yes.
Scott.
Mhm lousy joke.
Prices are still pretty lousy in the rental market.
And there.
Say that pricing is coming back, but it is coming back much slower, but at least it's coming back and so is 70% achievable I believe 70% is achievable is it achievable. This year I don't think so.
I mean, I think that our objective is to get back to 70%, but I'd be looking and it's so easy for me to say this to you Scott.
Thousand 23 I just.
The market is absolutely tightening for high quality products and services.
It's.
It's just that it's a highly fragmented market still so it's going to take a bit of time, but.
I think we all see the light at the end of the tunnel now just don't count on it for this year.
Not this year, but in the years ahead.
Space elsewhere Okay.
Appreciate the color I'll turn it back thanks Scott.
Thank you. Our next question has been <unk> with Stifel. Your line is open.
Thanks, Good morning, everybody.
Good morning.
Two things just to start with can you sort.
The.
The relationship between the.
10% plus growth and rigs followed in the sort of the revenue comment on products up at least 5% can you can you just talk about that in the context of what appears to be improving prices.
Well, there's a delay between when Riggs, we had rigs and when we recognize.
Product revenue so just.
Just to be clear prices are not going down so don't think that because rigs followed go up by 10 and product revenue goes up by five that that's a reflection of pricing. It is absolutely not it's real.
Really a reflection of how quickly we can get how quickly equipment goes out to these risks. The other issue is that Pat sizes are increasing and his pads sizes increase.
The deployment of our wall had equipment extends as well you can probably I'm sure that that makes sense to you so Pat sizes.
Over time, our friend, but over the short term when we're adding rigs are not necessarily.
That breaks down the correlation between revs.
Revenue growth rate growth, but you can assume that over the medium term.
Product revenue will more than increase with rigs followed.
Great. Thanks for the clarification that was that was sort of my assumption, but I wanted to make sure I was thinking about it correctly.
The other question I had was in <unk> in 2021.
You guys appear to do a very good job of capturing some share on the product side from from the private so you obviously historically at a lower lower share with Howard evolving as as we look into 22, specifically I mean, we know you are extremely strong with that with the public's however.
Is it evolving in conversations with the privates right now and how should we be thinking about that in 2022.
Yeah, I think that our progress with the privates will continue we've we're never going to be as popular with the privates as we are with the public. So it's a select group of private is mostly made up of our friends who've exited the publix and gone to work for the privates.
But.
I think it's also important.
Realize that this team did a herculean job in the fourth quarter of making deliveries. So I think we may be one of the few service companies of which I am aware that that never missed a delivery, which is incredible and now we came close paint was drawing on the trucks as the equipment.
A plant, but we never missed a delivery.
What that met of course is that.
Like it or not we couldn't be nearly as aggressive in pursuing some of these.
Less high profile accounts, because we made a pledge to our core customers and we made personal pledges and I mean, the vendors that we would not miss a delivery and so that that made for some difficult choices.
Happy to say, though that.
Particularly in January and early February .
That were much better positioned to chase some some additional private activity than we were in the fourth quarter of 2021. So that's my long winded way of saying I've seen much I'm feeling much better about our ability to add private than I did at the end of last year.
Great No. That's hopefully the the consistency of results is impressive and I know a lot goes on and the backdrop that you added some color too so I appreciate that.
Thank you and can you. Our next question comes from Ian Harrison was type of Sandler Your line is open.
I think a more you Steven great. Thanks, how are you.
Right.
So we've all been chasing the rig count higher than we thought it'd be.
Ripping so far and arguably that has not had nothing to do with the recent leg up in oil prices right. We'd see we've gotten to 630 rigs probably on the price deck that we saw in queue for and let's be hypothetical and if we don't get any relief in the oil.
Market balances and higher oil prices are here to say the market is asking the us to grow much more beyond this year and not only that we've seen below growth ads in the Permian, which is supposed to be a growth engine. So if we break out too.
A higher call in U S rigs next year 23 and 24.
Where is cactus on capacity, because you're already getting close to recapturing your prior cactus rig count from 2019, when we were at a thousand rigs and you were in the high 200, it's because you've taken so much share. So if we get to that higher normal what would that require from you too.
To keep pace with that.
Well in terms of manufacturing capacity I think you may have heard on previous calls that we.
We have.
Okay.
How to say virtually unlimited capacity in the far east, but we have a lot of capacity in the far east So our problem or I should say Joel this problem.
Manufacturing hasn't been so much getting parts made.
And manufactured it's been getting them to the U S.
So if we assume which I think is fair to assume that the that the ocean freight situation.
Is going to get better towards the end of this year.
Not better right now, but if we begin to see in transit times go down.
This can't last forever.
I'm not really too concerned about our ability to produce the goods and get them to market a real concern is people do.
Do we have enough people to to satisfy demand. So are hiring this year has been pretty remarkable in terms of particularly in terms of field service technicians.
And.
It's continuing at a pretty frenetic pace of course that impacted our utilization so.
I think we're gonna be labour constrained, however, we always find a way.
I like to think that we are the employer of choice.
We treat people fairly we pay them a fair wage we allow them to make.
As much overtime as they can safely make.
It's a very good work environment, so to the extent they are out there and willing to work I think we'll be able to attract our fair share.
Tracking them fast enough.
I mean, I can't mislead you, it's been a problem and.
I think we'd all agree those of us in this room that that is.
That that is what consumes most of our.
Of our time right now is the people issue not the product issue right now.
Okay that makes sense. Thanks.
Well congrats on the qualification with Aramco and I think you have to say do you have your first <unk>.
South American shipments expected later this year can you speak to the scalability of the international business organically and I mean, I would imagine this is not a material amount of product sales for this year correct me, if that's mistaken, but where do you see the.
The runway for those those market over the next few quarters, yeah, it's not it's not a token amount I don't want to overplay it.
Yeah, it's pretty nice order and we sort of have expectations that this order in South America could turn it into something much.
Much more substantial I don't want to tell you when because I don't know when but.
I'm pretty optimistic about that.
Nicely, it's being made in Bowser city.
We're not having to rely upon.
Or compete.
Compete with the logistical headwinds that we have coming out of the far east.
In terms of.
Of the mid east.
You know the runway in the mid east how large that market is the attractive markets require trials and we're in the middle of getting those done. So I think the runway is is pretty substantial.
We are of course.
A very cognizant of our commitment to our customers here in the U S.
And we're also cognizant of the fact that that margins and returns.
Are still better. So if you have a finite amount of equipment that you can get across the ocean.
You know how we are we're going to we're going to send that equipment, where we received the best returns, but having said all that are long term plans have not changed in terms of international expansion.
I would like to be more specific but we have competitors, who listen to these calls you can.
That's great I appreciate it thanks Scott.
Thank you. Our next question comes from Taylor's.
Pickering Holt company your line is open.
Hi, Scott and team I, just had a follow up album.
On the international expansion comments, you made there so qualified within Aramco, obviously, you can deploy a rental equipment via Nestor in Saudi Arabia, but on the wellhead side, just curious now that you're qualified with the Ram cow and how we should be thinking about potential wellheads penetration for you guys in Saudi moving forward.
That's a good question I should have been more clear.
Approval from Aramco was for rental not for wellhead equipment.
Got it that's helpful Alright, well had equipment as much as those of the trials that were involved in an issue hitting now it's much longer process. We were generating revenue in Q3 and Q4 on a trial basis, yes, and so now we we should be able to deploy more equivalent that's right.
Okay understood there an unrelated to follow up on.
Working capital inventory balance I think at all time highs and there's good reasons for that which you highlighted just curious move before and how we should be thinking about inventory I mean, you're going to have to keep building that balance up over the course of $2022.
Navigating a supply chain or are we sort of that peak levels in and around today or Q1.
Yeah, I think we have a little bit more to go but like we said in this in the script.
It should be moderating in Q1, so rich.
Really in queue for we just had a tremendous amount on the water.
Much much greater than we'd ever seen and then in addition embedded in that inventory number is higher freight costs as well.
Like Scott mentioned those are starting to moderate we expect them to to come down over time, but they haven't come down as much as we would like obviously.
And.
Yeah, I think we'll be in a better place starting in queue to to say we've reached a peak.
Understood. Thanks for answers.
Thank you as a reminder to ask a question at this time. Please press in one our next question comes from Cameron Lockridge with Stevens Your line is open.
Hey, good morning, Thanks for taking my questions.
Cameron how are Ya.
Well. Thank you how are you guys doing.
So we're doing great.
So I guess I'll I'll do the honors and ask one M&A and the cash balance.
Maybe if you could just speak to what you're seeing in terms of the patient deal flows.
Valuations geographic expansion you'd even sure there and then just a refresher course on what are some of your top considerations that you look at them as <unk>.
<unk> as you're getting some of these deals.
Yeah camera I don't think anything's changed.
We have not given up on industry consolidation. So that's our number one priority.
Importantly, I don't think the industry has given up on industry consolidation.
In terms of valuations yeah, obviously, the valuations are going to be higher today than they were this time last year, but.
Our currency is also more valuable today than it was this time last year, so I don't really consider that to be.
An impediment to getting a deal done.
Impediment is finding the right deal.
So.
I also think that we're seeing as I mentioned more deals that are that are outside of our our sort of core offering but still meet the criteria of being.
Being engineered products.
Manufactured products products that are sold to end users rather than the service companies and products that can be distributed through our 15 feel service locations.
Absolutely seeing more of those opportunities out there.
If it's private equity is decided.
While I'm sure. It is private equity's decided maybe now's the time to monetize.
After they probably given up hope over the last couple of years. So there are certainly more opportunities and.
We're sort of in fuel enviable position of having.
Cash balance.
And.
You will currency.
Yep.
That's great. Thank you Scott and then as it related to follow up just on.
On the cash balance.
Wondering as we look into 2022.
What we could expect to see just barring any M&A announcement.
And after the the 20 to 30 million Capex after the dividend.
Should we expect that could we expect that to that balance to grow.
Or or is cash flow after you know.
After the dividend.
Relatively neutral.
We would expect cash to grow barring any like you said M&A or further dividend increase.
So.
We are constantly evaluating what what to do with that cash obviously, we've made M&A evaluation a priority I think we're like Scott said, a buyer of choice and there's not that many buyers.
For some of these businesses that are looking to sell so we will continue to be selective and evaluate further capital return initiatives.
We've been clear before we don't we don't really like stock buybacks. We think there are typically done at the wrong time.
So barring that it's further increase in regular dividend are looking at some sort of variables structure.
Kinda what the operators are doing.
Makes sense alright, Thank you I'll turn it back.
Thank you.
Thank you and I'm currently showing no friends at this time I'd like to hand back over to the company for any closing remarks.
Thank you everyone for joining look forward to speaking with you want our next call. Thanks, everybody. Thanks for your support.
A good day.
This concludes today's conference call. Thank you for participating you me now.
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