Q2 2023 Thermon Group Holdings Inc Earnings Call
Greetings and welcome to the <unk> Group Holdings second quarter fiscal 2023 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
I will now turn the conference over to our host Yvonne Salem, Vice President S. P N E and Investor Relations. Thank you you may begin.
Thank you Diego good morning, and thank you for joining today's fiscal 'twenty 'twenty three second quarter conference call.
This morning, we issued an earnings press release, which has been filed with the SEC on form 8-K and is also available on the Investor Relations section of our website. Additionally, the slides for this conference call can be found in our IR website under news and events IR calendar earnings conference call Q2.
<unk> 23 during the call we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non-GAAP measures should be considered in addition to and not as a substitute for.
Mess yourself financial performance reported in accordance with GAAP.
I'd like to remind you that during this call we might make certain forward looking statements regarding our company. Please refer to our annual report and most recent quarterly report filed with the SEC for more information regarding our forward looking statements, including the risks and uncertainties that could impact our future results or.
Actual results might differ materially from those contemplated by these forward looking statements and we undertake no obligation to publicly update any forward looking statements whether as a result of new information future developments or otherwise except may be required by law now I would like to introduce Bruce themes.
Our president and Chief Executive.
<unk> officer, where he is opening remarks.
Well, thank you Bob and good morning, everyone and thank you for joining us today.
I wanted to begin today by setting the stage with a quick overview of SAR model.
As a 68 year old company, we've been tested and proven resilient across many economic cycles.
We're a world leader in providing safe reliable and innovative mission critical industrial process heating solutions to customers in 85 countries from facilities on four continents.
Our over 1300 employees have an industry, leading safety record and are dedicated to creating value for our customers by executing our strategic long term plan, which I will discuss in more detail in the next few slides.
I'd also like to thank and recognize our Canadian team for being an excellent.
The excellence of warranty as one of Canada's safest employers in 2022.
Thank you all for your commitment to safety.
Turning now to slide four you can see our strategic pillars in order to create value for our shareholders over the long term. We're focused on three key areas first profitably growing our installed base second diversification digitization and developing market.
And third disciplined capital allocation.
We benefit from a very large global installed base, which provides significant opportunity to capture recurring revenues, while driving growth across our traditional end market verticals.
We are driving additional growth through diversification into attractive adjacencies, such as commercial rail and transit food and beverage and other end markets.
Our solutions also help enable the long term transition towards sustainable energy sources.
We're expanding our solutions in the area of Digitization with products that utilize the industrial internet of things and support customer demand for productivity reliability efficiency and safety enhancements. We're also seeing growth in the developing markets driven by a rising middle class and low.
<unk> has become increasingly important, particularly with ongoing supply chain challenges to be price point lead time and content requirements for our customers.
Finally, we're committed to disciplined capital allocation with inorganic growth through bolt on acquisitions and debt paydown to maintain balance sheet strength as our current priorities.
Turning now to slide five.
We are increasingly focused on enabling the transition to sustainable energy and decarbonization.
As the world moved towards carbon neutrality in 2015, we are seeing a wide range of opportunities of March you can see here that our portfolio offers a wide variety of products and services that are critical for the transition to renewable energy sources as well as for decarbonization.
Efforts.
Our heating applications support renewable energy sources, such as wind farms solar plants and battery power.
Our products and services also contributes to the process of de carbonization through electrification carbon capture and storage and recycling amongst others.
Our technology and controls and communication high temperature in harsh conditions make thermion uniquely qualified for many of these applications. This year, we've secured over $16 million in orders in these applications with a growing pipeline of over 150 opportunities.
Our team of technical experts are dedicated to delivering solutions that help our customers achieve their sustainability and decarbonization objectives.
Moving now to slide six on our end markets and the external environment.
I would like to again emphasize the progress that we've made against our end market diversification strategy at the end of fiscal year 'twenty to approximately 60% of our revenue came from non oil and gas end markets compared to roughly 50% in fiscal year 'twenty one.
In fiscal year 'twenty three we're currently seeing a strong recovery in the oil and gas sector outpacing other end markets that is largely focused upon maintenance combined with efforts to increase throughput and reliability on the installed base.
However, we are also seeing continued success in our efforts to diversify and we will diligently work toward our long term goal of targeting 65% to 70% non oil and gas revenue by the end of our fiscal year 2026.
We continue to see strength across the majority of our other end markets. We believe that the strong maintenance environment and chemicals and petrochemicals combined with customer demand for end use plastics enables those markets to grow over the longer term the headwinds from margin pressures and increased European <unk>.
<unk> prices are partially offset by the cheaper and abundant feedstock here in the U S.
In the power sector, we expect growth going forward to be driven by the transition to electric power and renewable energy along with the rise of the middle class in Asia.
Several of the verticals that make up the strategic Adjacencies category continued to experience growth, including renewables such as hydrogen biofuels in nuclear power as mentioned earlier, we have secured over 16 million in orders this fiscal year.
Overall, while we're not immune to the impacts from ongoing macroeconomic turbulence, we believe the breadth of our solutions combined with our diversification across a wide variety of both geographic and end markets continues to serve us well.
Turning now to our results for the second quarter of fiscal year 2023 on slide seven.
Third <unk> had another quarter of outperformance driven by our team's outstanding execution, despite ongoing macroeconomic challenges, including supply chain disruptions and softening of revenue in incoming orders in Europe , we achieved record second quarter adjusted earnings per share.
Due to strong performance in North America, which benefited from the ongoing recovery in the oil and gas industry with.
We've also been able to offset increased material and transportation costs with strong price realizations, while diligently managing controllable cost and continuing to make strategic investments to grow our business over the longer term.
For example, the integration of our power blanket acquisition announced during the first quarter is on track and produced over $3 million of revenue during the second quarter.
Revenue of $106 million was up 24% year over year, adjusted EBITDA nearly doubled year over year to $22 million with a margin of 21, 8% an increase of 770 basis points free.
Free cash flow of negative $1 3 million for the quarter was impacted by short term investments, we made in inventory to address global supply chain constraints.
Nonetheless, adjusted EPS was a record 38 cents a share an increase of more than 200% from the prior year period.
While global macroeconomic turbulence is ongoing we're raising revenue and EPS guidance for the full fiscal year, given our robust performance in the first half and a continued strong backlog in the business.
On slide eight you can see that our orders and backlog continued to remain strong year over year orders were up 3%. Excluding a one time labor contract while bookings grew 18% on a trailing 12 months basis book to Bill was <unk> nine five times, our backlog of 160.
$8 million was up 3% year over year, excluding FX impacts.
With that I'd like to now turn the call over to Kevin for a more in depth review of our financial results Kevin. Thank.
Thank you Bruce turning to revenue on page nine first I would note that we are very pleased with our overall performance this quarter as the global Fairmont team continued to drive profitable growth, while meeting strong customer demand.
In the second quarter was $101 million up 24% versus prior year and exceeding internal expectations.
Sales growth in the Western Hemisphere was a result of continued deferred maintenance activity in upstream and downstream oil and gas and chemical end markets and investments driven by sustained commodity prices and global demand, while maintenance spending in the oil and gas markets is growing considerably we are still focused on executing against our <unk>.
Long term goal of market diversification by the end of fiscal 'twenty six we expect that at least 65% of total revenues will come from diversified markets other than oil and gas.
We continue to see progress in those markets with rail and transit up 67% and food and beverage up 122% year over year.
FX negatively impacted revenue by 3 million due to the stronger U S dollar, which we expect to continue to impact our business in the quarters ahead reported results also include a full quarter of power blanket financials were $3 million in revenue pheromones revenue growth, excluding acquisitions and on a constant currency basis was 24.
You're saying year over year, we are pleased that our integration of the power blanket acquisition is progressing smoothly with commercial integration activities completed on plan and in advance of the winter heating season.
Point in time revenues grew 24% in the quarter and 29% in the trailing 12 months, which underscores the strengths in maintenance spending across our global installed base. As a reminder point in time revenues are aligned with our product our material sales well overtime revenues, which were up 24% in the quarter and 34%.
On a TTM basis are representative of project work, where we have engineering and installation services.
Over time revenue growth was driven by increased activity in smaller design and supply projects, particularly in downstream oil and chemical end markets over time. Our project revenues represented 38% of total revenue this quarter versus point in time or material revenues of 62%.
Now for gross margins and SG&A on page 10.
Reported gross margins in the quarter or 46% versus the reported 39% last year with a few items will call out to provide context on the improved performance.
In the second quarter of fiscal 'twenty three volume contributed an increase of 630 basis points driven by both the strong point in time sales in the western hemisphere, and the mix and over time of sales towards the design and supply projects mentioned earlier, we continue to be able to manage the price cost equation with favorable pricing impact.
In this quarter of 200 basis points.
Offset by global supply chain headwinds of 400 basis points.
Operational efficiencies contribute an additional 110 basis points in the quarter. Please.
Please note that the trailing 12 months in prior year quarter data includes the impact of the large one time labor contract. We discussed on our previous calls and for which onsite work was completed in May of 2022.
As a quick reminder, we deduct depreciation from the S. E C reported selling general and administrative expenses to arrive at the SG&A on the slide in the quarter SG&A was $25 2 million or 25% of revenue versus the prior year of $20 4 million or 25% of revenue on a trailing 12 month basis.
SG&A was almost $90 million or 23% of revenue up from $77 million and compared to 25% of revenue in the prior year, demonstrating our ability to increase efficiency as we grow the business.
We remain diligently focused on managing the controllable spend while continuing strategic investments in our business to drive profitable growth over the longer term and our aggregate SG&A dollars will increase during the balance of fiscal 'twenty three because of those factors.
We've continued to proactively manage spending to ensure we are directing capital towards the highest returning investments that will help us to scale and diversify the business with ongoing macroeconomic challenges most notably in Europe , we want to ensure we are positioning the business for success and attractive profitability through the cycle.
Moving on to page 11 for adjusted EBITDA and earnings per share.
The combination of higher volumes carefully managing the price cost equation in a volatile environment and continuing our pursuit of operational excellence has yielded very positive bottom line results. This quarter. This is the strength of the thermo business model and representative of the execution, we expect from the team as we deliver on our strategic.
<unk> objectives.
Adjusted EBITDA was $21 9 million or 22% of sales in the quarter. Adjusted EBITDA has almost doubled up over 11 million from the prior year, along with margin expansion of 770 basis points.
On a trailing 12 month basis adjusted EBITDA is now up to 78 million along with margins of 19, 4% an expansion of 500 basis points.
Howard blankets business is quite seasonal and is not expected to meaningfully contribute to adjusted EBITA growth until the heating season begins in the third quarter.
Given the strong performance in the first half of the year. We are now projecting a 300 to 400 basis point expansion in adjusted EBITDA margins from fiscal 'twenty to 16, 4%.
GAAP EPS in the second quarter was 33 per share a significant increase compared to one cent per share in the prior year and adjusted EPS was <unk> 38 cents per share versus last year's 12 per share for the trailing 12 month period GAAP EPS was $1 11, and adjusted EPS was one <unk>.
31 FES.
On page 12, we will cover the updated balance sheet.
We ended the quarter with cash at $32 million, when we paid down $4 6 million of total debt during the quarter, resulting in a net debt to adjusted EBITDA ratio of 1.4 times, an improvement of 0.9 times versus the prior year.
We will continue to look at additional M&A opportunities as an attractive capital allocation option, which we believe will play a key role as we continue our strategy of diversifying the business over the next few years.
Working capital results were mixed as we invested in our inventory, particularly raw materials to buffer disruptions, we've seen in the global supply chain secure supply of key raw materials and prepare for the seasonality of our higher volume winter season.
We anticipated our working capital would increase due to the robust demand and ship volumes in the quarter and we expect inventory turns and particular to normalize our supply chain challenges subside and volumes increase in the second half of the year.
Historically Fairmont has been able to generate positive cash flow through the cycle and as a reminder, we had generated positive free cash flow in the previous 15 consecutive quarters.
On the right side of the page, we had negative quarterly cash flow due to the strategic investments in inventory with free cash flow of negative $1 3 million in the quarter Capex was $2 million and predominantly focused on maintenance, we expect to deploy over $10 million in Capex. This year as we continue to invest in our strategic initiatives and conclude some maintenance activities.
<unk>.
This quarter built upon last quarter's positive performance with significant margin expansion, while the outlook in Europe continues to be an area of concern and supply chains are nowhere near the pre COVID-19 levels of cost or lead times. The thermal team continues to execute against its short and long term plans and we see opportunity ahead.
To continue to drive strong results and create value for shareholders. Many thanks to the Fairmont team for the great work and commitment that enables us to deliver for our customers shareholders and our communities and with that I'll ask Bruce to provide an update on our fiscal year 'twenty six plan.
Kevin Thank you.
I'd like you to now turn to slide 13, and our long term revenue goals.
Our goals for fiscal year, 'twenty twenty-six remain unchanged and we're very pleased to be progressing well toward these objectives.
This chart shows the impact of COVID-19 on the business in fiscal year, 'twenty, one which is the base year of our five year strategic plan.
Subsequently, we saw growth in fiscal year 'twenty, two that was driven by the early stages of recovery in our end markets and successful execution of our strategic initiatives.
With our strong performance in the first half of this fiscal year, we've revised our fiscal year 'twenty three revenue estimate to 405 million to $420 million, which will put thumb on in line with our peak revenues established in fiscal year 19, and we believe puts us on track to achieve.
<unk>, our fiscal year 'twenty six growth objectives.
We will continue to drive execution of organic growth strategic initiatives and acquisitions across the entire enterprise to achieve our goals.
We're continued to place a high priority on diversifying our end market exposure, specifically targeting industrial markets outside of the oil and gas sectors to represent 65% to 70% of revenues by the end of our fiscal year 'twenty six last but not least we expect operate.
<unk> excellence combined with leverage on our fixed cost to yield EBITDA margins in the low to mid 20% range over that same period.
Turning now to slide 14, and our updated guidance for the fiscal year 2023.
We are very pleased with <unk> strong performance in the first half of this fiscal year in spite of the number of areas of uncertainty in the current macro environment. The positive momentum we are seeing in quotations bookings and backlog give us confidence to raise our fiscal year 'twenty three full year revenue and EPS guidance.
We're raising fiscal year 'twenty, three revenue to 405 million to $420 million, which represents roughly 16% growth over the prior year at the midpoint of the range.
GAAP EPS guidance for the full year is being raised to $1 eight to $1 17, a share an increase of roughly 90% at the midpoint over the prior year.
We're also raising adjusted EPS guidance to $1 30 to $1 39, a share for the full year, an increase of 62% over our fiscal year 'twenty two on top of the 150% growth delivered in the prior fiscal year.
Finally, wrapping up on slide 15, as we've detailed the day Fairmont as a world leader in providing safe reliable and innovative mission critical industrial process heating solutions.
This is a high value niche market with high barriers to entry, which is a significant competitive advantage our outstanding global team our diversification across a variety of end markets. Our large installed base, our after market business that generates recurring revenue and our low capital <unk>.
Tensity combined to create a business that is resilient across economic cycles.
We believe that thermal is truly well positioned to deliver profitable growth through the remainder of 'twenty, three and beyond and to create long term value for our shareholders.
I'd like to now turn the call over to our moderator Diego for the Q&A portion of this call.
Diego.
And at this time, we will be conducting our question and answer session.
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Yeah.
Our first question comes from Brian Drab with William Blair. Please state your question.
Hi, Good morning, Bruce Hi, Kevin.
Good morning, Brian .
Okay.
Can we go back to slide five just for a second.
Talk about these projects in the pipeline first of all can you just clarify did you say.
How much revenue did you say that you generated and over what time period related to these categories.
I had noted the bookings are in slide five so.
I don't have.
A revenue number for this quarter.
But I can say that if you could repeat if you could just repeat whatever you did say.
Yeah. It was a $16 million in bookings year to date I can tell you that.
Roughly equivalent to what we booked in all of last fiscal year. So we are seeing a real growth here in these areas and I think this slide is great and illustrative of all of the opportunities that we have to play in this emerging economy in this.
Really the shift in our energy markets and are in the March toward de Carbonization in 2015.
And just to clarify Youre, saying 66 year or 16, 1616, which is roughly 8% of bookings year to date are tied to these areas.
And the other point is we've got over 150 opportunities in our pipeline now and growing.
Right and I wanted to ask about that.
It sounds like a very substantial pipeline.
Couple of questions on some of those projects.
Larger projects and then do you expect to see the same type.
Type of you know the same competitors when you when youre bidding on these projects.
And I'm just thinking like typically some of the larger projects globally, you see Claremont and advent and that's pretty much it.
Is that.
Going to be the same kind of situation here or are there other competitors that are that you bump into in this space.
Well.
It really depends on the opportunity certainly when we think about certain product lines.
Invent would be one of our larger is our largest competitor in our heat tracing business, but if you think about the breadth of our portfolio whether that be probably.
Process heating immersion heating environmental.
Tubing bundles all of those things our competitors do differ and and as you can see here. There's you know, there's a pretty wide range of of products and applications across all of these so the competitive landscape will differ depending upon the opportunity.
And Brian I would add when you think about the size of the opportunities here at it runs the gamut, but I think I would tell you it skews towards the smaller side of things and it's.
It's not your kind of large big heat tracing installs I would kind of skew jamar towards maybe the process heating engineered type system is from a size standpoint, so hopefully.
Hopefully that helps give you a little bit of context there.
Yes, absolutely.
And I guess one last question on this slide do you.
Fine.
One of the things that kind of.
Reveals itself in this slide is that you have a broad portfolio of solutions for these different cat.
Categories.
And is that a competitive advantage, having the broad portfolio of <unk>.
To offer for these different vertical.
Absolutely. It gives you an ability to really bring the right solution to solve the customers' problem. It gives you different touch points within.
Their customer in the organization so without question it really gives us.
A real competitive advantage as we pursue and develop these types of opportunities.
Okay, great Yeah, it's going to be interesting to see this develop.
Just shifting to margins correct.
Correct me if I'm.
If I wrote it down wrong, but I think you said expectations for 300 to 400 basis points increase in EBITDA margin this year.
If I got that right can you talk about what you expect for the balance of the year in terms of gross margin.
And for that $3 to 400, how much comes from gross margin versus Opex leverage.
Yeah, Brian This is Kevin I think when we when we think gross margins specifically for the back half you know you've got the advantage of the heating season, which generally skews a little more towards the material side of things, which is which is higher margin.
When we look at the backlog margins and backlog for the projects I think are consistent with what we've seen in the first half of the year. So that's what a part of driving the uptick here that you're seeing year over year and then we certainly don't have the headwind on the big contract that we had in backlog last year. So I think you put all that together it it feels like we are.
Gonna have gross margins in the range of that kind of historical.
So call it 45%, where we've seen in the past, but you know, there's obviously puts and takes with the mix a realization with projects you know do you get it in the year versus just out.
We feel pretty good about delivering that gross margin consistent with where we've seen it in the first half of the year in the back half.
Okay. The $45 seven that you did here in the second quarters very strong gross margin.
Do you expect to come off of that level somewhat or that's what I was wondering is that now we're going into heating season, you just put up 45, 7%.
Up from there possibly.
Yeah keep in mind Q1 was a little bit lower so when we kind of mixing the year to date.
Gross margins Youre, not youre, not near that 46% level on a TTM basis gross margins would be about 44%. If we exclude that labor project as well. So I think the team has certainly been able to demonstrate that we can get into those mid forties.
But certainly as you know the mix within the mix is a factor and then certainly the timing around that can skew.
Skew the margins a little bit in the back half. So I think we feel pretty good about that mid mid forty's range for gross margins in the second half.
So can.
Can you give that number again just to make sure I got it you said, excluding the large project gross margin was 44% over what period Youre alright.
That's a T T M number Brian So that's 44, 1% on a trailing 12 basis.
TTM got it Okay, and then can I just ask one more on.
Can you elaborate a little.
A little bit further on Europe , because this is obviously.
Like I think the first question I get on thermal for investors at the moment.
Going into the.
Winter here in the gas situation in.
Can you just talk about the different dynamics, there and how that connection.
Potentially be a positive for their mine or is it.
Is it all risk or how do you look at that.
Yeah.
Brian well first of all first of all.
I think we kind of let's look at short term and then more midterm opportunities.
The really europes dependent dependents upon.
Russia for oil and gas.
There's a lot of work that has to be done to really.
Re shift there.
Sure.
There are sources of supply and that creates opportunities for <unk> and we are seeing that particularly in kind of natural gas midstream and it's manifesting itself in.
LNG liquefaction.
As well as LNG tankers things like that so those are all positives.
We are seeing just the higher energy.
Costs in Europe .
Just having a pretty.
A negative impact just on the.
The operations there.
On the continent. So so that's a headwind.
That's all baked in and factored into our.
The back half of our <unk>.
Year forecast, so we feel like we've accounted for that risk in the in the forecast that's been provided.
But certainly we also see those higher energy costs in Europe , particularly are making other and I'm speaking more specifically around petrochemicals chemicals, and petrochemicals theyre, making other lower energy cost.
Geographies more competitive the U S is actually benefiting from that so there's some offset and as part of the reason we believe we're seeing such strength in the U S.
Kind of chemicals and petrochemical sector.
Despite what <unk> seen is some margin pressure globally for.
For various reasons so.
Theres overs and under <unk> and Theres, certainly some positives in the mid to longer term, but we see just kind of near term weakness with.
The higher energy costs and.
Just the operations there on the European continent.
Got it all very helpful. Thank you very much.
Thank you and our next question comes from Jon Braatz with Kansas City Capital. Please go ahead.
Good morning, everyone.
Good morning morning, Jeff Bruce in your comments you talked about how strongly this year on your oil and gas market has been in and a lot of deferred maintenance.
What kind of legs does that have by definition, it's deferred and you assume they're going to get caught up how long does that oh that last.
Yeah. So you know.
John is that as I kind of look at this kind of looking at a few different things.
First and foremost we saw.
Maintenance spending being deferred for a protracted period and if we kind of go back to COVID-19, it's the first really economic downturn in which we've seen where we could not access customer facilities. So maintenance actively activities virtually stopped and then before that.
We actually had a you know.
Period really since 2014.
Where a lot of the maintenance and an underlying spending.
In my opinion was fairly depressed.
Then we also have a tighter supply environment here, which you know I think independent of <unk>.
What we could see in <unk>.
Potential recession, I think we're still going to see tight supply.
There's not been any and when we look at the recovery, it's not in Capex, it's really in the maintenance spending and it since it's really investments in kind of debottlenecking and improving productivity and reliability.
Think these are fairly sustainable over.
A significant period of time.
At least another 12.
To potentially 24 months.
Just in kind of catching up.
With a lot of this and also trying to get the most.
Out of the assets that are in place because where we're seeing capital allocation strategies really shift from.
Big Capex deployment by a lot of the oil and gas companies to more a return to shareholders and so a lot of what we're seeing here is investment in the in the current asset base to optimize throughput and ensure they're reliable going forward.
Okay alright, thank you.
Bruce Lee.
Inflation reduction act and the.
Infrastructure Bill.
Keep getting in indications that there's going to be a pickup in spending.
In 2000 and calendar 2023 will begin to see some benefits two questions number one.
Hmm.
Are you seeing or do you envision some benefit from maybe the spending that babies coming on online in 2023, and then secondly.
You like everybody else have supply chain challenges and this is a broad broad question.
If you have supply chain challenges now.
And we're going to see increased spending.
From the inflation reduction act and infrastructure.
Why are these are will these will the supply chain problems persist well.
Well into 2023, how do you look at that.
Well.
It's a great question.
First let's start with just the opportunities yes, we do believe.
That some of these spending bills are going to create opportunities for our business I mean, I can look at power, particularly rail and transit.
And those areas certainly we see some benefits.
Those businesses are growing.
Year over year, as we look and those are after we've had significant growth.
In the prior year. So you know power year to date is up 24% after a 200% growth last year in rail and transit is up almost 40%. So we see that kind of continued strength.
As far as the supply chain challenges and disruptions we are seeing it improve.
In a number of areas, but there are still kind of a couple of acute.
Our acute areas, where we're still having to manage through.
I guess the unpredictable part here is where supply chains are linked back to China, and we have the the zero tolerance policies in place you know.
Those shutdowns that occur really negatively impact those factories, they're hard to predict and so I think just from a supply chain challenges, it's harder to sit here and prognosticate about what might happen I think we've made a lot of adjustments in our supply chain too.
To have redundancy and resiliency and all of that is having a favorable impact we did increase our inventory levels in certain areas, where we see some.
Some challenges so that helps us ensure security of supply for our customers.
But it's a little harder murkier to really predict.
How much of this will abate.
Over the next say.
Two to four quarters, yeah, Okay, Alright, I understand thank you very much.
Alright, thank you.
Thank you there are no further questions at this time I'll hand, the floor back over to Bruce <unk> for closing remarks.
Alright, Thank you and thank you all for joining us on the call today, we appreciate your investment and interest in <unk> and <unk>.
Have a good day. Thank you.
Thank you. This concludes today's conference all parties may disconnect have a great day.