Q4 2021 Target Hospitality Corp Earnings Call
Okay.
Good morning, and welcome to your target hospitality is fourth quarter and full year 2021 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad after today's presentation.
There will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.
I will now like to turn the conference over to Mark Schuck Senior Vice President of Investor Relations. Please go ahead.
Thank you.
Everyone and welcome to target hospitality fourth quarter and full year 2021 earnings call.
The press release, we issued this morning outlining our fourth quarter and full year results can be found in the investors section of our website. In addition, a replay of this call will be archived on our website for a limited time.
Please note the cautionary language regarding forward looking statements contained in this press release the same language applies to statements made on today's conference call.
This call will contain time sensitive information as well as forward looking statements, which are only accurate as of today March 10th 2022.
Target hospitality expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's date, except as required by applicable law.
A complete list of risks and uncertainties that may affect future performance. Please refer to target hospitality periodic filings with the SEC.
We will discuss non-GAAP financial measures on today's call. Please refer to the table in our earnings release posted in the investors section of our website to find a reconciliation of non-GAAP financial measures referenced in today's call and their corresponding GAAP measures.
Leading the call today will be Brad Archer, President and Chief Executive Officer, followed by Eric E Calomiris Executive Vice President and Chief Financial Officer.
After their prepared remarks, we will be joined by Troy Schrenk, Chief commercial officer and open the call for questions.
I'll now turn the call over to our Chief Executive Officer, Brad Archer.
Thanks, Mark Good morning, everyone and thank you for joining us on the call today before we get into our 2021 results I want to briefly touch on the leadership transition announcement, we made last week.
It was important for us to ensure there was ample time to have a smooth and orderly transition and as we said I will continue to lead the company through the balance of 2022, and then transition into a strategic advisory role I'm excited about targets opportunity set and look forward to progressing its strategic initiatives in 2022.
And ensuring business continuity through this transition now.
Now I would like to look back at target significant 2021 accomplishments.
Targets impressive 2021 results illustrate the strength of the company's operating position and commitment to our defined strategic initiative. We entered 2021 with a goal to diversify our end markets, while significantly strengthening target's balance sheet and operational flexibility.
We accomplish these objectives with the deliberate actions, we took to create an efficient operating structure.
Simultaneously positioning the company to take advantage of improving demand fundamentals.
Since year end 2020 target has experienced in over 47% increase in customer demand across its hff's segments. This illustrates the value our best in class customers find and allocating labor to targets World Class network and Premier service offerings.
These attributes continue to sport and over 90% customer renewal rate, which we have enjoyed for many years.
As targets utilization and customer activity increases we are match this demand with minimal incremental capital and continue to benefit from the scale and efficiencies we have created within our operating structure.
This network optimization creates an ideal scenario and maximizes the margin contribution from each additional utilize bed supporting robust margins and significant cash generation.
Additionally, our superior operational capabilities, and unmatched hospitality solutions, where the catalysts and securing a new government service contract award one of the largest in the company's history.
Targets government segment represented 54% of 2021 revenue.
Supported by fully committed minimum revenue contracts backed by the U S government.
This is a clear illustration of our commitment to diversify and expand targets end markets, while simultaneously high grading counterparty exposure and contract structure.
These positive business fundamentals accelerated progress on our strategic objectives.
Target generated operating cash flow of $105 million, a 124% increase from 2020.
And discretionary clash cash flow of $93 million.
This significant cash generation materially strengthened target's balance sheet and resulted in a 58% reduction targets net leverage ratio in 2021.
These accomplishments have allowed target to materially enhance its operational flexibility, while simultaneously diversifying its business mix and establishing a foundation to continue pursuing strategic growth initiatives.
These growth initiatives will be focused on broadening targets end markets, while significantly expanding our long term growth opportunities.
Target will pursue these initiatives while simultaneously remaining focused on expanding its reach providing critical support to the United States government.
Target has intentionally established itself as the premier provider of permanent hospitality solutions for the U S government long term domestic humanitarian aid missions tar.
<unk> targets Premier and comprehensive service offering is viewed favorably by the U S government and our scale and operational operational capabilities are unmatched in North America.
As it relates to our government service contract, which began in March of last year discussions have meaningfully progressed regarding the extension and expansion of this contract.
These discussions have recently evolved in.
To include options for multi year terms and expansion opportunities considerably greater than the current contract.
The government has recently posted its public notice of intent to award a sole source contract for the continuation of the current service offering.
This marks a critical and one of the final steps in the government's notice and ultimate contract award procedures.
We are highly confident in a successful outcome to these contract discussions and the continuation of our critical humanitarian support to the United States government.
We were encouraged by the sustained momentum experienced throughout 2021 and our results illustrated the benefits of our strategic positioning as north America's Premier provider of vertically integrated hospitality solutions.
We have strategically positioned target and diversified our business mix to intentionally focused on expanding our long term growth opportunities.
Which we believe creates the greatest value for our shareholders.
The progress we have made executing on our strategic initiatives is impressive and we are focused on sustaining this momentum in 2022 .
I'll now turn the call over to Eric to discuss our fourth quarter financial results and ongoing growth initiatives in more detail.
Thank you Brad and good morning, everyone.
In the fourth quarter, we experienced a continuation of strengthening demand fundamentals, which benefited target throughout 2021.
Since year end 2020 target has experienced a 123% increase in customer demand for our premium modular accommodations and hospitality solutions.
This impressive and sustained demand supported strong fourth quarter and full year 2021 financial results, which exceeded the high end of our 2021 financial outlook.
Full year 2021, total revenue was $291 million and adjusted EBITDA was approximately $119 million.
For the year, we have discretionary cash flow of $93 million.
Presenting an impressive 32% DCF yield, which illustrates the cash flow resiliency within our business and allows us to continue enhancing our operating flexibility as we move through 2022.
Our government segment produced quarterly revenue of approximately $47 million compared to $14 million in the same period last year.
A significant increase.
An additional U S government contract award executed in March 2021.
<unk> contributed approximately $33 million of revenue in the fourth quarter.
As a reminder, targets government segment supported by minimum revenue contracts, which are fully backed by the U S government over their respective contract terms.
Our hff's segments delivered fourth quarter revenue of $34 million compared to $24 million in the same period last year.
This increase was driven by sustained momentum in customer demands for targets premium service offerings.
Supported by strengthening commercial activity and economic demand.
We'll target has significantly grown its revenue and adjusted EBITDA over the past year, we have remained diligent and appropriately managing cost components across the organization.
We've taken active approach managing our input costs and benefit from our service offering flexibility, which allows us to adjust primary cost components to mitigate pricing pressure.
As such our input costs have remained within our expected ranges and have not materially impacted margin.
We will continue to monitor signs of inflationary pressure and look to evaluate pricing of our services to compensate for negative cost impacts to the extent they occur.
As a matter of practice targets maintains a disciplined approach to managing costs throughout the organization.
Provides significant flexibility, which has allowed target to preserve margins across a variety of operating environments.
Recurring corporate expenses for the quarter were approximately $8 million and illustrate our ability to significantly grow the business, while incurring minimal incremental cost.
As a result of the scalable business model, we anticipate recurring corporate expenses to remain around $7 million to $8 million per quarter through 2022.
Total capital expenditures for the quarter were approximately $13 million.
Donald Lu directed towards enhancement.
Services segment directly supporting the new contract award.
As a result, the government segment experienced 242% year over year quarterly revenue growth.
We ended the year with $23 million of cash and $340 million of total debt.
Providing available liquidity of approximately $148 million with net leverage ratio of two seven times.
Because of our high level of cash generation, we achieved a 58% improvement in our net leverage ratio during 2021, well ahead of our business plan.
Because we are achieving a high level of cash generation, coupled with minimal capital spending.
We have industry, leading return on invested capital.
We are enthusiastic about 2022 and expect these high levels of cash generation to continue.
We are excited by the strengthening commercial activity and associated demand for our services.
These elements supported targets strong fourth quarter and full year results and provide confidence in the cadence of customer demand in 2022.
As a result, we anticipate 2022 hff's revenue to increase between 12 and 17% from 2021 levels.
Additionally, we are pleased with progress made in contract discussions regarding the extension and expansion of our 2021 humanitarian aid contract Award supporting.
U S government.
The government has proposed an award of a sole source indefinite delivery indefinite quantity contract otherwise known as an IV Iq.
This is a contract for a partner who serves as the prime contractor with the U S government and is a continuation of services at our influx care facility.
As well as for all the humanitarian services target hospitality currently provides.
This contract shifts the nature of the facility from an emergency influx site to a permanent site.
As a reminder, the government direct crime counterparty and our partner to this contract.
National nonprofit organization.
Target is a subcontractor to the disagreement providing comprehensive hospitality solutions to a nonprofit customer to a fully committed contract backed by the U S government.
The government contract award process is complex and requires many procedural steps prior to contract award.
This idea IQ allows the government to streamline the procurement process and provides for other agencies that are looking to procure the same services across various agencies.
One of the final steps prior to contract award is for the government to publicly coast. Its notice of intent for services that outlined the contract type of duration and other relevant scope of details.
This critical step occurred in late February .
Completion of the statutory 15 day notice in response to Covid.
Once the formal contract was awarded to our partner.
<unk> anticipates finalizing the terms of our subcontract with our customers.
All targets, new subcontract was being finalized.
We intend to enter a one month extension of the existing contract and sharing there'll be no interruption to the influx care facility or the humanitarian services target is providing.
Additionally, existing economics will remain in place prior to the new contract being finalized ensuring a seamless constant continuation of these critical humanitarian doses.
As a result of targets in our customers' past performance as.
As well as the United States government desire to maintain existing facility and services without interruption.
Highly confident of a successful outcome to this contract renewal and extension discussions.
Strong business fundamentals have continued to support sustained momentum entering into 2022 and provide confidence in our continued cadence of customer demand throughout the year.
As a result today, we announced our preliminary 2022 financial outlook, which consists of revenue between $325 million beginning at $35 million in it.
Adjusted EBITDA between $125 million and $135 million.
We also anticipate $12 million to $17 million of capital spending.
Target has strategically positioned itself as north American market leader in providing premier vertically integrated hospitality solutions.
We accomplish this by intentionally focusing on markets and world class customers offer the greatest long term revenue growth potential while optimizing our existing assets, we have unique capabilities to maximize economic returns.
These principles have established a highly attractive financial profile that generates best in class margins.
The substantial cash flow conversion.
Additionally, our asset fleet requires limited maintenance capital leading to significant discretionary cash flow.
This is illustrated by an impressive 103% increase discretionary cash flow for full year 2020.
Depressive cash flow generation, coupled with focused capital allocation.
Salted and significantly enhancing our balance sheet and financial flexibility.
This accomplished we anticipate turning our focus to strategic growth.
Targets enhanced financial position and strong cash flow profile builds the foundation to pursue strategic growth initiatives.
On broadening targets end markets, while significantly expanding long term growth opportunities.
Targets growth strategy will focus on utilizing its existing core competencies to pursue a balanced portfolio of service offerings, while expanding its reach in the government services end market as well as select adjacent commercial markets.
The foundation of our existing network and broad reaching capabilities create a platform to pursue these opportunities with limited capital requirements.
Really impressive return on invested capital while simultaneously preserving the financial flexibility we have created.
These characteristics of our growth strategy meaningfully increased revenue visibility and strengthened economic returns, while enhancing targets unique value proposition.
We believe these attributes create the greatest opportunity to accelerate value creation for our shareholders.
With that I will turn the call back over to Brad for closing comments.
Thanks, Eric.
Targets 2021 results illustrate the benefits of targets unique position as north America's leader in modular accommodation in hospitality solutions, while exemplifying our commitment to executing on our strategic objectives.
Is that attributes allowed us to meet and exceed our customers' varying needs while significantly enhancing targets financial position in 2021.
These accomplishments have created a tremendous amount of momentum as we enter 2022, which we will utilize to continue progressing our strategic growth initiatives.
As we have stated we will remain focused on aligning our strategic growth with target's existing core competencies, while preserving our strong financial position we have achieved we.
We believe this creates the optimal scenario to accelerate value creation for our shareholders there.
I appreciate everyone joining us on the call today and thank you again for your interest in target hospitality I will now pass the call back to the operator for Q&A.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys.
If at any time your question has been addressed and you'd like to withdraw. Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Steven Janeiro with Stifel. Please go ahead.
Thanks, and good morning, gentlemen.
Thanks, David.
And congrats Brett on your transition.
Thank you.
Yeah.
The two things I wanted to ask you about I think first.
Your your guidance.
It seems to include.
An extension of the existing government contract and then.
I was just curious based on what we had seen on the government website. It looks like that contract could be up to 50% larger is am I right that your current guidance includes sort of an extension at the current size.
Hi, Stephen Good morning, it's Eric.
Thanks for the question. It's a good question. So you know as we have said historically when we when we entered the contract on nearly a year ago. You know we expected this to continue to live on and so yes sure. We have we've always assumed that.
And that has continued to live on at existing economics, and that's been our underwriting assumption for some time now and not changing anything as it relates to the 2022 outlook.
Okay. Thanks.
Is is there a do.
Do you envision and I know, it's probably hard to answer but do you envision that on a per unit basis, the economics remain pretty similar.
Look I hear here's here's what I would say.
Look the scope of the IV IQ is complex it will take some time to work through the economics of that there are a variety of puts and puts and takes that can be flexed in a number of ways, depending on what the customer ultimately desires at the end of the day. There are certainly a number of specs in the idea of Q.
But even that being considered all of that takes time to evaluate operationally and financially, but I think for your purposes, and frankly for our purposes. We've assumed that that continues to to move on it's similar similar economics yeah.
Yeah, I mean, you talked a little bit in the spread I mean, we're highly confident that moving forward right. The piece that we're doing today I think there's a variety of possible final contract terms when it comes to the expansion that's mentioned in the <unk> IQ, while we feel good about that the needs. There. It's listed in the in the <unk> IQ is.
Well.
Warning.
Still in the in the middle of finalizing scopes the potential for for a foreign expansion.
But feel very good about the extension as it sits today continuing to move forward.
I understand thanks, and then just just two others.
One was when when we think about the.
Just one more operational question when we think about the puts and takes in the or I guess in the oil patch and the government, but on the cost side.
And what you're seeing on the cost side versus you know what the what the margin profile looks like and I honestly didn't run the.
I didn't divide the numbers up but it just kind of curious what how you're thinking about that and the impact. It has on margins and I imagine scale helps offset some of that as you as you get busier, but I'm just curious what the puts and takes are there yet.
Yeah, Let me just touch a little bit on a higher level.
We look at labor.
We've been able to maintain adequate staff to gas ratio definitely the labor market is tighter.
But we've been very good about maintaining that so so we're good there and when we look at inflationary pressures and different things on food and in that we are you know our volume or scale of purchases. The menu flexibility we have at a operational level really allows us I'm not going to tell you.
In 2021, it didn't affect us some.
But we've accounted for that those the inflationary pressures we've seen in 2021.
We were able to mitigate very well I think we will continue to be able to do that in 2022 and I would tell you they're accounted for as far as you know puts.
Puts and I'll, let Erik Morton ill touch on that sure. So when we think about the three compounded the three largest components of the of the cost of service cool one will be labor and the other one will be will be food purchasing and the other one the other last.
The last one will be utility utilities.
Look on foodservice thing and Brad touched on labor. So let me hit on foodservice Ing for a moment, where we're one of the top 20 providers of food servicing in the country in terms of purchasers right. So we have we have massive scale and then I'll take the marketplace necessarily appreciates that but its substantial scale. So so when we think about cost of servicing and we think about on a per unit.
[noise] basis heading into 2022, we expect that on a per unit basis to continue to come down right just partially as a function of occupancy increasing at a relative a higher pace than we expect cost increase we do expect to have some inflationary movement. However, we're able to ameliorate a substantial portion of that so as opposed to the headline numbers you see.
Being a 79% whether it be CPI or PPI, and we're talking low single digits, which which would frankly not be drastically different than what we've seen in the past. So we will continue to monitor it.
But I don't think we should look at anything that that impacts margin degradation to that to that point now when you look at things on the top line at a consolidated level for target just just to bear. This in mind I think it's worth mentioning that we did have T. C. P. L. A last year included in 2020 . One so we won't have that carrying forward into 2022.
So at an aggregate level, you'll see a little bit of movement on the margin.
But largely as a function now of having that having costless revenue last year. So just just bear that in mind I think you know that but just just reminding you.
Yes, yes, I understand that okay, I will I'll stop there I'll get back in line. Thank you.
The next question comes from Scott Schneeberger with Oppenheimer. Please go ahead.
Thank you very much good morning, everyone I guess I'd like to start off on the on the government contract extension and a.
Kind of a two part question could.
Could you discuss kind of the.
Through the process, leading up to now and more importantly, the back part of this question is how do you envision that timeline.
Going forward it looks like there is.
Some sort of exploration on the on the noticed hosted from from a few weeks ago.
Tomorrow evening, so how should we think about this as it goes to your customer and to you just just to keep that in mind. Thank you.
Yeah, Scott this is Brad good morning.
For relevant.
Purpose of this is very similar to the transition that occurred with our government services contract at the South Texas family residential center, so while the processes.
<unk> and slow.
Uh huh.
It's not new to us.
Not atypical to how these things work I think the biggest thing I would point everyone to is the sole source <unk> Iq.
That was kind of the the.
The gating issue you've needed that to happen first.
I can't remember the exact date, maybe mark does but it should have that 15 day notice period is coming up.
So once that happens, we're not sitting still and we've already been talking and negotiating contracts.
Look I think here, we're highly confident what will happen is we'll receive a 30 day extension to allow for all of us to finalize contracts. The hope would be that we could get that done and that 30 day extension if not it would be extended again, but the ultimate goal for everybody based on that idea Iq.
<unk> has to come out of here with a long term contract. That's what's being awarded it is just a function of the 15 day period, and then finalizing the contract.
Great. Thanks, and following up on that is still in the government segment.
The.
Capex guide is lower this year than last year, obviously, there was a lot of capex tied to the to the to the March contract last year in getting that up and going what is what is embedded in the guidance for capex. This year. It is it is it anticipating extension or is that not in.
Should we expect perhaps an update if things if they did.
Developed favorably on that government contract with regard to what may be required for for additional capex.
Sure sure. Good question, so when we put out the guidance and we purposely termed it to be preliminary because because of the contracted negotiations that were going on.
And the reason for that was when we think about the not only the extension opportunities with the expansion opportunities those can be meaningful. So when we think about moving forward into 2022, just on a standalone basis, assuming the extension well. The capital has already been has already been assumed right. We did a lot of that last year and as it was a pretty big pretty big lift in the.
The first half of last year. So we've got a lot of that so what you're seeing from predominantly is some maintenance work that that hits in the HFF side of the business now as we move forward to the extent that there is a <unk>.
Spansion opportunity.
That capital could be mean, and then we'll come back and update that accordingly, just as we move through those discussions so as I mentioned before there are a number of different permutations that the customer could ultimately.
Your desire over and above the idea IQ and so that that can have implications as it relates to capital spending.
Great. Thanks, I appreciate that one more for me and it's gonna be over in the hospitality segment South the.
And in the overall company guidance. This is more you were asked on the cost side. This is more on the demand side, what's embedded in the guidance. This year with regard to expected oil price over the course of the year, maybe rig count labor per rig count I'm. Just just how are you thinking about that with this.
This guidance at this point, obviously oil prices and show activity.
Likely to be to be volatile here going forward.
Sure Good question so.
I'm going to give you a little bit of context.
Just to see even understanding before I get into the meat of your question. So when we think about when we think about the outlook and we think about it as it relates to the commodity pricing.
We don't think about it as being as linear as perhaps as perhaps what youre, what youre thinking we think about it in terms of an overall the overall construct of a pricing scenarios over over the year right. So when we when we put the budget together.
With the business plan you were looking at pricing.
And you're looking at utilization trends and occupancy rates that typically exhibit something in the you know call it.
65 to $70 type area.
And that's what we're basing our occupancy levels on and part of the reason for that is because we tend to see about a quarter to four month lag from increasing permit levels and so that's part of the rationale behind that.
Not expecting necessarily to see.
Two months later crude prices that would've been peaked in the $130 a barrel.
That being said in 2021 we saw consistent gains throughout the throughout the entire year right. It was a lot of it was front half weighted coming out of two dozen COVID-19 residual hangover, but we saw a nice positive movement. There. We continue to expect to see that this year and look we'll see good solid double digit year over year quarterly.
Revenue growth.
Again, and that's that's what's going to be embedded in the numbers a lot of that is going to be weighted in the first half.
But we expect that to continue all through the year I think what you're seeing now in the current marketplace, a wait and see what would producers and.
And service companies ultimately do they've continue to stick with their development plans, which is which is fine.
But look this meant you know maybe the current environment. We see is more helpful to that and pushes things further the right fashion the way we expected, but that's not what we're assuming.
And just one thing to add to that.
And Eric right, what we're not hearing from our customers right now it's still early.
That they're going to start adding a whole bunch of rigs a lot of buyers are the bigger.
Your bigger.
E&P companies.
Just tell you if that happens in the back half of the year. It takes a little time for it to trickle down to us, but if it does.
The way, we built out our network, especially in the Permian Basin, we're setting in a really good see to capture that business, we're already doing business with those folks. So if that comes with updated but if it comes at the back of the year. I think you know we ended up getting a lift from that because we're already setting.
The contracts with with the customers that would actually go out and start to do some of that drilling.
But today, we're not seeing that.
Great I appreciate the perspective, you guys. Thanks.
The next question comes from Greg Gibas with Northland Securities. Please go ahead.
Hey, good morning, Brian and Eric Congrats on the quarter and thanks for taking the questions.
Hum.
I apologize if I missed this but.
What are you expecting you mentioned government represented 54% of 2021 revenue, what's kind of implied in your guidance for 2022.
In terms of the split between government for Saturday.
Yeah.
Greg Thanks for the question it would be it would be exactly the same we've assumed a lot of those.
A lot of the structures for the government, you're just continuing to roll while we continue to expect positive movement on the energy side, which you would think would tilt that mix. The reality is though we didn't have a full quarter of the government new contract last year right. So we have to we have to impute another quarter of that.
When you look at it on a relative basis, those things actually I was close to offset each other and so you would expect it to be in that 50, 455% level now to the extent, we get you the expansion that honestly, we will shift that mix, obviously towards the government side. However, we'll have to wait and see what that looks like.
And when that comes.
Right that's helpful.
And I guess I apologize also if I missed this but.
Relating to the government contract you remain pretty confident that there'll be settled but are you.
We're expecting that to happen by the end of this month or are you anticipating a.
30 day or a month delay.
So we're definitely anticipating a 30 day extension everything rolls as it is today.
And within that 30 days. The hope is all of us finalize that that contract that we've been working on.
Got it thanks for clarifying and you know.
I guess lack of for me just relating to your general thoughts on refinancing your existing debt.
How much of a priority is that and kind of timing related.
Okay.
Sure Great question, we look at that we've looked look we've looked at that for some time and.
I think we're in a spot now to be able to execute on that two two to the extent the market is available to us and to the extent it fits within our other strategic objectives.
Right now the high yield market is not has not cooperated just given some of the macro backdrop, we've seen over the past number of weeks, but we will continue to evaluate that and we will look to do things that are there certainly favorable to where the current the current rate is on the notes. So certainly certainly top of mind for us.
We want to do that on balance with our entire strategic objective as well and so that will just some not only as an economic decision. It's also a a decision strategically.
Okay, great. Thanks very much.
And we have a follow up from Stephen Janeiro with Stifel. Please go ahead.
Thanks, Thanks for taking the follow up two quick ones just to follow up.
And this gets back to the balance of your question, but I understand the leverage ratio, but looking at the strong free cash flow of the very strong free cash flow generation.
How do you think about the balance between the debt reduction and returning more cash to shareholders given sort of the outlook for capex and what looks like a lot of visibility from the government work.
Stephen I'm not surprised you asked that question.
I suspected you I suspected you may.
Look we are as you know, we've we've maxed out all our pre payable debt and so that that's obviously the genesis as part of the question here.
All options remain on the table to maximize value for target all the time right. So there are certainly some options that are better than others.
You look we have positioned the company, though over the past couple of years to begin to the end of the stages of really being able to pursue growth in.
In our terms and do it actively and in evaluating a variety of opportunities that really fit nicely within our core competencies.
And so we want to continue to pursue that path right and so well.
We will always look at opportunities to return to return capital back.
I think to the extent that some of our other strategic opportunities don't don't develop for one reason or another perhaps direct shareholder return opportunities come you know come more to the forefront of the table.
But all things all things remain viable at this point, but like I said, there was some better opportunities to grow shareholder value for the long term.
Others, and so I wouldn't consider those to be the highest priority right now.
Thank you and then just one final one for me.
Well I'm trying to kind of ask it but when we think about it.
I talk to the companies in the oil patch they clearly have.
Some constraints on their business right, whether it's frac sand or truck drivers are just labor in general and they are kind of growing through it but I'm curious how you guys are thinking about what's the impact of a tight labor market for the oil companies both service and E&ps.
On sort of the demand for your services and what's how does that how is your competitive position sort of impact.
That yeah.
You take those things into consideration is it better or worse for you in the labor markets that that Titan I believe you said in the past as kind of a a sort of a selling point for the operators to stay in target facilities, but kind of curious on your updated views there.
Almost 30 years in the business me and.
I can tell you.
In the past when it's a tight labor market.
And they're fighting for.
For the truck driver or the frac can or any of the oil and gas folks that are in the field.
It's better for us as we offer a superior product we're not the cheapest.
But they're willing to pay for it.
When it's part of their hiring package and if it helps them retain their employ it becomes even a more of a benefit and a tighter labor market than it is just on regular course of business. So it's not that we liked it for them to be in the pain.
But this is not a bad thing for our business.
Great. Thank you for the color.
Absolutely.
This concludes our question and answer session I would like to turn the conference back over to Brad Archer for any closing remarks.
Thanks for joining the call today, and we look forward to talking with you all again next quarter. Thanks.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Yes.
[music].
Okay.
Okay.