Q2 2022 FirstService Corp Earnings Call
Welcome to the second quarter Investors Conference call. Today's call is being recorded legal counsel requires us to advise that the discussion scheduled to take place today may contain forward looking statements that involve known and unknown risks and uncertainties.
Actual results may be materially different from any future results.
Performance or achievements contemplated in the forward looking statements.
Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the company's annual information form as filed with the Canadian Securities administrators and in the company's annual report on form 40 F. As filed with the U S Securities and Exchange Commission.
As a reminder, today's call is being recorded today is July 27 2022.
I would like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead Sir.
Thank you Chris.
Everyone. Thank you for joining our second quarter conference call.
As usual Jeremy <unk>, our CFO is on the line with me today I will start us off with a high level review of.
Our performance in growth drivers and Jeremy will follow with a more detailed look at the financial results.
Let me open by saying that we are pleased with the way the second quarter played out for us, particularly the strong organic growth we generated.
Our teams continue to battle through a very tough labor environment to drive solid gains.
Total revenues for the quarter were up 12% over the prior year with organic revenue growth at 6%.
If we exclude restoration, which was down organically against a tough comparative quarter in 2021 organic growth was over 10%.
EBITDA for the quarter was $91 3 million slightly up versus Q2 of 'twenty one.
Reflecting a margin of nine 8% compared to 10, 8% in the prior year.
Jeremy will walk you through the year over year margin dilution in his prepared comments and provide a look forward.
Looking at divisional revenue first service residential was up 13% year over year with organic growth at 7%.
Organic growth was driven by new contract wins net of losses, leading to higher management fee and labor related revenue.
We achieved gains in all our markets with particularly strong growth in the southeast and Texas.
We estimate the price accounted for between 2% and 3% of the quarterly gain.
Looking to the back half of the year, we expect to show high single digit revenue growth almost all organic as we lap the acquisition date of our Atlantic Pacific Tuck on during the third quarter.
Moving on our first service brands revenues for the quarter were up 11%, 4% organically.
Our home improvement brands led the way with growth of 25% almost all organic.
Sequentially relative to Q1.
We were up by over 10%, which is reflective of two things.
Our continued success in adding capacity, despite a tough labor market, particularly.
The installation crews and Payors.
And secondly, less COVID-19 related downtime during the second quarter relative to the first one we were hit by Omicron in January.
The home improvement market continues to be relatively strong average home prices again rose during Q2.
And home equity values remain high which should continue to support renovation spending.
Our leads are down year over year and sequentially.
But still remain at a healthy level and we continue to focus on adding capacity to meet the demand and reduce backlogs.
We expect to show strong, 20% plus growth in home improvement for the balance of the year.
Turning to our restoration brands first onsite and Paul Davis.
We generated revenues that were down slightly from the prior year and adjusting for acquisitions were down 10% organically.
You will remember that we generated $50 million in revenue from the Texas deep freeze in Q2 last year.
In the current year quarter, our revenue was broad based geographically and driven more by day to day activity out of our branches.
Rather than by area wide events, where we deploy significant resources and personnel.
We did not generate any revenue for named storms or significant regional events this past quarter.
If we adjust for the Texas event last year organic growth was 10%, which we're very pleased with.
Q2 restoration revenues were reflective of our backlog at the end of Q1.
Our current backlog is solid but down modestly from Q1 and from Q2 last year.
Last year, we entered Q3 with some storm related backlog and later in the quarter, we generated revenue from Hurricane Ida which hit in late August early September .
In total we booked approximately $30 million from named storms in Q3 last year.
Looking forward, we expect Q3 revenues to be modestly down from prior year.
Unless of course, we experienced significant storm activity over the next couple of months.
Moving now to century fire, where we had a very strong second quarter.
Growing by over 20% organically versus a year ago, and up 10% sequentially sequentially compared to Q1.
The robust growth was driven by sprinkler and alarm installation the commercial construction market continues to be very strong.
The growth in installation revenue was supported by continued momentum in service inspection and repair activity.
We are having great success in converting our new installs into ongoing service work.
<unk> exceeded expectations during the quarter and we expect continued 20% plus growth for the balance of the year.
Backlog is at a record level.
Let me now hand over to Jeremy for a more detailed dive into the results.
Thank you Scott and good morning, everyone. As you just heard our financial results for the second quarter performed in line with the expectations, we laid out at the end of our prior first quarter.
On a consolidated basis, our Q2 results included revenues of $931 million.
And adjusted EBITDA of $91 $3 million.
Up, 12% and 2%, respectively, and adjusted EPS of $1 12.
Down from $1 21 the.
The prior year quarter.
Combined with our Q1 results, which were largely similar to the current second quarter or six months year to date consolidated financial performance is as follows.
Revenues of $1 77 billion, an increase of 14% over the 154 billion last year, including 8% driven by organic growth.
Adjusted EBITDA of $153 $7 million, representing 3% growth over the $149 6 million last year with a margin of eight 7% down from the nine 7% in the prior year period.
And adjusted EPS at $1 85 realm.
Relatively flat to the $1 87.
Our share reported during the same six months period last year.
Our adjustments to operating earnings and GAAP EPS to calculate our adjusted EBITDA and adjusted EPS, respectively have been summarized in this morning's release and remained consistent with disclosure in prior periods.
I'll now walk through our segmented financial highlights for the second quarter.
Starting with the first service residential division, we reported revenues of $457 million.
A 13% increase over the prior year period.
EBITDA for the quarter was $50 5 million.
A 9% year over year increase with an 11% margin down 40 basis points from the 11, 4% margin in Q2 of last year.
This performance reflects incremental margin improvement sequentially from the previous first quarter, when we were down 70 basis points year over year.
As we have previously indicated we expect to continue closing the margin gap in the remaining half of the year and realized annual margins for the first service residential division in line or relatively similar to our 2021 full year performance.
Shifting over to our first service brands Division second quarter revenues came in at $473 million, an 11% increase over the prior year period.
We reported EBITDA for the quarter of $43 9 million a.
A decrease of 9% compared to the prior year period.
Our margin during the quarter was nine 3% down from 11, 3% in last year's Q2.
We have talked in prior quarters about the ongoing inflationary pressures impacting our margin and in this quarter, we saw particularly strong surge in fuel costs within our service delivery van fleets.
That were not covered off given the pricing lag with our jobs.
The primary driver behind the margin decline was in our restoration operations, where we previously called out the headwinds against last year's Texas freeze.
That event generated both high margin mitigation jobs, and an incremental $50 million in revenue, which drove operating leverage.
Since that time, we've continued to invest in building out our operating platform National sales organization and response teams to better serve our clients. While also completing 10 restoration tuck under acquisitions over the past year.
This quarter as Scott mentioned, we were down 10% organically on the top line compared to last year without a similar event to the freeze, which together with our ongoing investments resulted in lower restoration margins.
Notwithstanding the near term drag on margins during periods of mild weather patterns. The investments we have made in our restoration operating platform are critical to capitalize on the market opportunity and drive towards becoming a $2 billion revenue service lines.
We expect to reap the benefits of our ongoing investments and platform integration initiatives over time on both the revenue and earnings lines.
Near term during the current third quarter, we would typically expect more heightened weather related activity to occur, which will drive improved sequential financial performance compared to Q2.
However, if weather remains as mild as in the second quarter, we expect a similar contribution in Q3 from a restoration businesses.
Moving onto components of our cash flow operating cash flow was roughly in line with prior year before the impact of working capital and resulted in $62 million available after working capital requirements. We.
We invested $20 million during the quarter and supported by existing operations and our year to date Capex of $36 million keeps us on track with our full year targeted spending of approximately $85 million.
With no clothes tuck under acquisitions during the quarter, we directed almost $40 million of our free cash flow towards debt paydown and increasing our controlling ownership stakes through selected minority interest buyouts.
We have continued to make progress in replenishing, our acquisition deal pipeline, including dialogue with several potential targets at varying stages of advancement.
We would expect to see further transaction activity before closing out the year.
Finally, a look at our balance sheet, where our net debt position is $512 million and our leverage as measured by net debt to EBITDA.
At one five times.
Liquidity, reflecting total undrawn availability under our revolver and cash on hand is sizable at approximately $550 million.
We are very well positioned with our conservative capital structure and ample funding sources to use our balance sheet strength and capitalize on opportunities that may present themselves in any type of market environment.
In closing the market demand fundamentals across our businesses remain healthy and you've heard Scott walk through the.
Continued strong organic top line growth indicators for each service line to support the consolidated double digit revenue growth for the balance of the year.
Our operations have collectively worked hard and demonstrated resiliency to drive profitability in the face of widespread inflationary pressures.
Our first service residential division is right on track with our projections to close its margin gap by year end.
Within our first service brands portfolio of businesses, our home improvement brands and century fire protection have and will continue to drive robust growth on both the top and bottom lines.
Our restoration operations as mentioned earlier are dependent on weather driven activity, which is unpredictable, but typically elevated in the back half of the year.
Any meaningful uptick in regional or area wide events. During the remainder of 2022 will provide us with greater profitability growth than our year to date performance.
That concludes our prepared comments I would now ask the operator to please open up the call to questions. Thank you.
Thank you.
As a reminder to ask a question so need to press star one one on your phone.
And by as the compile the Q&A roster.
Our first question comes from George do Matt.
Scotiabank Your line is open.
Yes, hi, good morning, guys good morning.
Morning, George.
Scott when looking at the brand has been your commentary suggests the labor market's improving grinding capacity. So I'm just wondering do we have enough capacity today to service.
Current demand levels and can you maybe share with us the quantum of how much the leads are down sequentially or down year over year.
This is an expectation out there for software the map of home improvement.
Are you can you can share there.
Right now the leads are down less than 10%.
Over prior year.
Sequentially down a.
A couple of percentage points.
But you remember George last year.
We were in a position, where we really couldnt get to all the incoming leads so we're in a much healthier rhythm right now.
In terms of.
Getting to getting tour leads converting them.
And.
Booking the business and completing the business in <unk>.
And we we have a backlog that is it is still booked too far out but starting to.
Come down to a point, where we're more comfortable in terms of customer experience.
But I would say that all all indicators that we have to.
As I indicated in my prepared comments, 20% plus growth for us through the balance of 'twenty, two and we think it will continue.
Continue to be very healthy and a 23 at this point.
We.
We are continuing to recruit and build out our capacity to try to get that backlog down.
To where we want it.
The labor market remains.
Very difficult I would say.
But where we're having we're having more success, but very incremental.
Thank you for all your questions.
That's really good color. Thank you and maybe one last one for me Jeremy I guess reading between the lines. It looks like you expect margin could be down in brand year over year, given the lack of storm activity.
Is that a fair statement and maybe.
It looks like margins were down 50 basis points for the first half of the year.
Commentary from margins to be flat I'm, just wondering if that a function of.
Just higher fixed price contract renewals or is there any upside to that number at all.
Yes, so just on brands.
Any degree of weather activity will help the margins there and will average them up from where we are this quarter, but if we don't get any weather were probably more in the.
In the realm of margin.
The margin area for the current quarter.
So it's a restoration as a bit of a swing factor there on the margins and the degree of weather related activity on the residential side.
It's a combination of.
Both.
Pricing in the catching up with the <unk>.
Wage inflationary pressures that we've talked about it would take time and then also.
Always looking for.
Greater efficiencies, our market's attack a different ways staffing models are we serving our clients.
Efficiencies in the heart of the house.
<unk> of our support roles with the frontline.
And we've got open positions. So it's really a combination of those factors that are going to allow us to drive.
The margin improvement in the back half and close that gap.
Alright, Thanks, guys. Congrats good luck.
Okay.
Thank you.
One upon next question.
Okay.
Our next question comes from Frederic Bastien Raymond James Your line is open.
Hi, good morning, guys.
Youre pointing to high single digit organic growth for <unk>.
First service residential in the second half how much of that are you expecting to experience from contract price increases.
We think it is going to stay in the same kind of range Frederic.
We estimate we're at two 5%.
The balance is from new contract wins.
And.
All right.
Sorry go ahead.
No I'm, sorry, I'll, let you finish.
Yeah.
<unk>.
In particular, we are having.
Success in the Sunbelt.
And with large scale.
Lifestyle communities that have a.
Complex broad service offering in these communities.
Generally have over 100 sited employees.
And they are there.
Our service requirement includes amenities and food and beverage and fitness and wellness.
<unk>.
Not many of our competitors are able to compete for these types of communities the breadth of our offering and our experiences.
It is driving some driving wins for us.
Over the last year.
Are you seeing any pushback to the price increases that you are.
Implementing our.
But nothing unusual I mean networks. So thats why we are.
It's why we're at.
2% or a bit over because we are.
We're not getting price increases across the board.
Certainly we're not getting.
As much are enough to cover off our wage inflation.
In some cases, we're getting increases signing new contracts and getting increases staged over a number of years in some cases, we're getting partial coverage or full coverage.
But there are there are many accounts where they are.
Checking the price through RFP.
And so it's.
In many cases, we're having to make a decision whether we strategically.
That customer or reallocate those resources.
There is a balance between margin and organic growth I would say.
In this inflationary environment.
So it's not unlike what you experience.
I remember four five years ago, you you actually went through that exercise et cetera.
Yes.
We don't mind, losing the lower.
Paying customers if it means we can reallocate our resources.
First one is that the similar exercise we're going through it's not an exercise.
I mean, it's client by client and it's really no different than.
We've experienced we experience every year.
Due to the price competition.
Contracts will.
Go out to bid.
Each creates.
Price tension and we have to respond and.
Make a decision and so there are just I would say.
This inflationary environment, it's happening more frequently it's not a particular exercise that we're going through.
Okay I appreciate the color. Thanks, Scott can we go back on the comment you made about M&A.
I'm wondering if the discussions you're having or predominantly with on the commercial restoration side or are they pretty evenly distributed across segments here.
I would say that the there is balance.
Balanced across both divisions.
But the activity.
In restoration still.
Still high.
Yes.
Still there's still a lot of pressure competition from private equity here.
Definitely.
Definitely there is I mean.
<unk>.
This years.
It's interesting in the first six months.
In general we're seeing that are the business performance financial performance of.
Prospects that is down in 'twenty, two versus 21, or whether it's inflation or labor issues are in the restoration space due to a lack of weather.
And many sellers are seeking to be paid on 'twenty, one results and so there is a valuation gap deals are taking longer.
But certainly.
The competition is still there.
Okay.
That's all I have thank you very much for your responses.
Thanks, Brian .
Thank you.
One moment for the next question.
And our next question will come from Stephen Sheldon of William Blair. Your line is open.
Thanks, and nice job on the quarter guys.
Free cash flow.
It move back higher this quarter, so for Jeremy curious, how youre thinking about the potential trend and free cash flow at a high level over the rest of the year.
It is a mix of businesses so.
Each one's got their own rhythm there are a lot of moving parts.
<unk>.
We should have better free cash flow after the seasonal trough in Q1.
Unlike where we finished off the quarter in terms of.
Operating cash flow and free cash flow conversion as a percent of EBITDA.
On an annual basis when you normalize.
We should have 50% free cash flow conversion as a percent of EBITDA, maybe maybe mid 40% to 50%. So I see it kind of improving for the balance of the year.
As best as we can see.
Great that's helpful.
I wanted to ask a follow up on the M&A side.
If we enter a recession.
If we're in a recession right now do you think your M&A priorities would change at all.
For example, I don't think you've done an acquisition on the California Closets side. Since 2019. So just curious if certain asset types could become more interesting to you in our in a recessionary environment.
Yes, that's an interesting question Stephen I think that.
Cal closets.
We have a company owned strategy there it really hasnt changed but youre right we havent.
Been active.
As active in the last.
Year to 18 months and.
The business is doing very well our franchisees are doing very well.
We've indicated two to those franchisees.
What markets that ultimately we want to own and.
Realistically, we will own them at some point, but where we're happy to work with a timeline that makes sense for them I think.
A recessionary environment.
If we do see a little bit of headwinds.
We probably will be more active on the Cal closets side outside of outside of that.
There will probably be more opportunity across the board in a recessionary environment for us and as Jeremy pointed out I mean, we have lots of liquidity and are able to move on move on those opportunities.
Yes.
Thanks.
Thank you.
And then one moment Paul next question.
Our next question will come from Stephen Macleod of BMO capital. Your line is open.
Great. Thank you and good morning, guys sorry, good afternoon, guys. Good morning.
I just had a couple a couple of questions here when you look at the margin impact in both residential and brands in the quarter is there a way to isolate how much of it was due to potentially.
Potentially.
<unk> inflation relative to some of the mix impacts that you talked about.
Yeah, Stephen I'll take that on the brand side I called out fuel.
And that would be a new one for us that raise its head in Q2 compared to a lot of the other.
Inflationary pressures from wages and other material inputs, which we've largely covered off they've been with us for quite some time so.
If fuel.
Is was about 25% of the margin compression out of the 200 basis points.
And then the rest on the brand side would be.
<unk>, both the mix headwinds with Texas freeze plus the investments.
Theme and commentary that I provided.
On the residential side, it's really.
I would say.
The margin.
Compression there that we are closing the gap on is largely the gap between pricing on our contract and the wage inflation. The themes that we've been talking about in prior quarters.
And.
I would say.
Sillery mix labor labor services versus higher margin in salaries would be a third of that component.
And then we're closing the gap between pricing and.
Just finding ways to operate more efficient efficiently.
With our frontline and support teams.
Okay. That's helpful. Thanks, Jeremy.
And then just on the outlook for margins.
Brandon I think you've done a good job of articulating where do you think you'll end up.
But on the residential business just wanted to clarify so I guess, what youre expecting as you've closed the gap in the back half of the year and do you expect to sort of finish the year on a flattish basis.
From a margin perspective year over year.
Yes in my prepared comments, we believe we're going to close it by Q4 end.
There is a decent shot that the full year margin will be in line with last year's performance and if not it'll be pretty close.
Okay great.
And then maybe just finally with respect to the storm impacts from last year, Scott I think you called out $30 million from names named storms can you just clarify did all of that fall into Q3 and is it fair to assume that maybe throw like a 10% margin on that to get the EBITDA impact from from that storm activity last year.
It all fell into Q3.
I'll, let Jeremy comment on the merger.
The.
We need.
What's become apparent is that the the extra storm related activity, where we get response teams mobilizing.
Events, where we've got national.
Teams in place.
Create higher margins then.
Then absent any weather events so.
If you're talking about $30 million of incremental revenue than it was.
Could come in higher than.
And then $3 million.
I'm not going to quantify it and it's also hard to parse out but it definitely will come in at a higher margin when you've got these area wide events.
Right. Okay. Okay, that's great that's.
That's good color. Thanks, so much.
Thank you.
One moment for the next question.
And our next question comes from Faiza <unk>.
<unk> of Deutsche Bank. Your line is open.
Great. Thank you so much and good morning.
Firstly I just wanted to touch on the residential business.
You mentioned that the backlog is easing I'm curious if you're able to quantify.
Like how much backlog impacted revenue.
This quarter and how much you expect the backlog to contribute to the back half of the year.
What im really trying to figure out is what.
The underlying trajectory in the businesses and trying to think about 2023.
So really any comments you can share on that would be helpful.
Pfizer Youre talking about our home improvement brands.
No I'm talking about just the residential business.
Okay. So we don't really think about backlog.
At first service residential those are all contracts.
The comments about backlog.
With respect to.
Our restoration brands century fire and our home improvement brands, which include California, closets, and sort of pro painters and.
Pillar to post.
And floor coverings international.
And with the home improvement brands.
The backlog, we're booked out about three to four months.
So the backlog we have.
We're basically booked through the third quarter.
But the all of our key indicators would point to that backlog continuing at a similar level, which would take us through the fourth and then we're just looking at sort of more macro indicators to guide guide us into.
Into 'twenty, three and we expect that.
We'll see continued.
Healthy.
Performance into the early part of 'twenty three.
Okay understood. That's helpful. I'm, sorry, if I missed that misunderstanding your comment.
Then on the on the residential piece I guess as we think about the.
Contribution of pricing it sounds like we shouldnt expect pricing to accelerate.
In the back half of the year and you've talked about some new contract wins.
How should we think about that again into 2023 as well like do you do you expect.
Do you expect pricing to be a contributor.
Into next year, as well and I guess I'm trying to figure out like how many of your contracts at this point if there is a way to quantify it.
I kind of add up.
At a pricing level, where you're able to buy your offsetting inflation and how much is left yes.
Yes, I think that the way you want to think about first service residential is that.
It's a contractual business.
We're managing these communities.
As they come up for renewal.
And we have one year contracts, primarily but we also have.
A high number of three year contracts.
When they come up for renewal.
Negotiating.
Price increases many of our new contracts.
<unk>.
Are much more clear around CPI.
So we're in reasonable shape to continue to get.
The 2% to 3%.
That we're currently getting and we would expect that to continue and at the end.
2023, the reason.
It is lower than.
CPI and really has been.
Is that.
These contracts do come up for.
Negotiation and it is a very price competitive environment.
So is there any more color I can give you anymore.
No. That's very helpful. Thank you so much alright.
Okay. Thank you.
Again to ask a question. Please press star one one on your phone.
And it looks like our next question will come from Daryl Young of TD Securities. Your line is open.
Hey, good morning, guys.
Morning, Joe.
With respect to the backlogs in the.
This slight declines youre seeing our leads down.
Is there a way to parse out how much of that is because you've added more labor and therefore, you're chewing down some of that versus.
Call it demand destruction. It sounds like the demand is still quite strong. So I don't know if theyre call inbounds that you measure or what not but is there any metrics you can give us on that.
The backlog is.
It is at a similar level.
And it has been.
Still too high.
We continue to work, we're having some success I would say bring it up down.
But the lead to decline in leads we're not.
We're taking note of it.
But it's not a concern for us.
And the stress that its still at a very healthy level.
And.
The lead I think Ive said in a previous answer that the leads are sort of.
Less than 10% year over year.
But they were just simply.
Too high in 'twenty, one with the pent up demand.
And the strong.
The strong hall.
Home equity values that were that were driving home investment.
Hmm.
Got you, Okay, and then just with respect to first service residential.
Looking in comparison to 2019.
Pre pandemic and all the noise and the mix margins are actually up 40 basis points.
Are we now at a point, where the mix of the revenue mix is sort of apples to apples with 2019 levels.
And therefore, the margin improvement is a function of operating.
Operating proven some price or maybe a little color there.
Yeah, Dara that's bang on the revenue mix has normalized.
The margin improvement is a function of.
Operating agreements in price or maybe a little color there.
Yes, Garo that's bang on the revenue mix has normalized in terms of labor and higher margin salaries and it is kind of what I said earlier.
Operating better have some open positions.
Staffing our teams just more efficiently than just finding more efficiently than just finding a way to better serve our clients.
<unk>.
And then of course we've.
We were taking pricing is appropriately to cover off the.
The wage pressures.
Okay.
And then if we were to enter into a period of extended inflationary environment and price pass throughs in resi.
Are there any competitive dynamics do you think would play out or I guess said differently can you continue the price pass through at these levels. If inflation continues or do you expect an acceleration of pushback from customers at pricing inflation stayed higher.
I think it would.
I mean listen these communities have to be managed.
And.
At the end of the day they have to they have to pay for pay for management services and so.
I think that as the if the inflationary environment continues.
Probably.
It will probably get easier for us honestly.
The price competition.
Won't necessarily necessarily alleviate but the small mom and pop competitors will really start to feel the pressure on.
On their cost side of the equation.
So.
It won't it won't it won't get worse I don't see that.
Yes.
Okay, Great and then just one last one.
On the restoration business and the growth investments you're making.
Is there a quantum there in terms of how many more quarters or dollar value of investment that's being made there. It sounds like most of the margin impact in the short term is more on the year over year weather mix, but just curious if that's something we should be aware of that maybe extends into 2023.
No.
Jeremy you want to cover that.
Sure.
It's a journey.
It's a multiyear investment process, we talked about various areas of investment shared services.
The support roles finance it HR with building an enterprise wide operating platform to support that national brand on the rebranding and we are building out a national sales team. So we continue to add and try and win more national accounts and sign up those master service agreements and then we need the execution response teams.
To cover off that incremental base.
Of accounts that were signing up so it's sort of like the journey that we went on.
Back several years ago with first service residential where we went through a rebranding and then we bill.
Built.
<unk> wide platform and we had a lot of.
Costs that went into that so multi year the margins are down now.
We'll work to incrementally claw that back, but it will take several years, but we're looking to build a $2 billion company here.
Sometimes the timing of the the area wide events in a volume of regional events to cover off that margin will get it we'll get it in periods and then we've got mild weather.
We'll be able to softer but.
Yeah.
We're comfortable with.
And as I said these investments are critical to kind of build the size of company, we are targeting to achieve as a market leader.
Okay got it that's great color. Thanks, Thanks, guys.
Okay.
Thank you.
I see no further questions in the queue I would now like to turn the conference back to Scott Patterson for closing remarks.
Thank you, Chris and thank you everyone for joining the call.
Enjoy the rest of your summer and we look forward to talking at the end of Q3.
Thank you.
Ladies and gentlemen, this concludes the second quarter investors and have a nice day participation and have a nice day.
Okay.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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