Q2 2019 Earnings Call
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Seen badger meter earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key as a reminder, today's conference is being recorded July 18, 2019 at 11 am Eastern time.
It is now my pleasure to turn the conference over to Karen Bauer Director of Investor Relations and corporate strategy. Please go ahead Ms. Bauer.
Good morning, and welcome to the Badger meters second quarter 2019 earnings call on the call with me today are Ken Bockhorst, President and Chief Executive Officer, and Bob Brocklin's, Chief Financial Officer.
The earnings release and related slide presentation are available on our web site.
Quickly I will cover the safe Harbor reminding you that any forward looking statements made during this call are subject to various risks and uncertainties. The most important of which are outlined in our press release and SEC filings.
Finally, please note that on today's call, we will refer to certain non-GAAP financial metrics, our slides provide a reconciliation of the non-GAAP to GAAP financial metrics use.
With that I will turn the call over to Ken.
Thanks, Karen and thanks for joining our second quarter earnings call today, So while our sales performance this quarter reflected the impact of innovation delays similar to what we've encountered historically I am pleased with our results on a number of fronts and remain encouraged by the funnel of opportunities as we look forward. For example, we generated solid gross profit margin improvement again this quarter, the fourth consecutive quarter with year over year gains our CA spend was well managed and we were able to reduce overall working capital and generate strong free cash flow in the quarter.
Bob will walk you through the details of the quarter and after that I'll come back and talk about a few key strategic initiatives and our outlook.
Thanks, Ken and good morning, everyone.
As you can see on slide four our overall financial results were mixed with lower sales, but modestly improved operating margins and robust cash flow.
Sales for the second quarter were $103.5 million compared to $113.6 million in the same period last year.
Municipal water sales declined 9.6%.
Excluding the large middle East order in the prior year sales were down approximately 7%.
The lower volumes are reflective of deferred orders for newer technology project products, including the Orion LTM radio endpoints.
In addition, our large diameter three and four inch you serious commercial meters, which we originally expected to be shippable early this year.
Continued advance testing and will not be available until later in the year.
Sales mix remain positive with increased sales of ultrasonic meters and meters with radios as well as increased Beacon service revenue year over year.
Flow instrumentation sales were down 6.6% year over year with lower volumes experienced across an array of industrial end markets.
Operating profit as a percent of sales was 14.5% a 10 basis point improvement over the prior year results. Despite the lower volumes.
Gross margin for the quarter was 30, 38.9% again in the upper half of what we would call our historic normalized range of 36% to 40% and 240 basis points above the prior year.
In order of magnitude favorable product mix was the primary driver with a higher proportion of ultrasonic meters meters with radios and Beacon service revenue as well as favorable regional mix.
In addition, we experienced favorable net pricing as brass input costs remained lower year over year.
The first half copper benefit is anticipated to level out as we get to the back half of the year as current copper pricing is at parity with second half 2018 input costs.
That's the expenses in the second quarter were 25.2 million consistent with the comparable period last year as higher internal growth investments incentive compensation and inflation were offset by effective cost control measures.
As you may recall during the prior year second quarter, we recorded an 8.2 million pretax or 21 cents per share after tax pension settlement charge.
The income tax provision in the second quarter of 2019 was 23.8% essentially in line with the prior year's 23.6% adjusted tax rate after exclusion of the pension settlement charge.
In summary, the lower sales and modest improvement in operating margins generated EPS of 39 cents in the second quarter of 2019, a decline of 7% from the prior year's adjusted EPS of 42 cents, excluding the pension settlement charge.
I was particularly pleased this quarter with the progress of our primary working capital management.
Which equated to 26.9% of trailing 12 month sales at quarter end down from 29.6% in the same period last year and 28.3% at the end of the first quarter.
This was a meaningful contributor to the strong free cash flow for the quarter of 20 $820.8 million, an increase of 28% over the prior year.
We built additional net cash on the balance sheet, which coupled with our net leverage comfort zone of two times at the mid point provides us with significant liquidity to fund our dividend program as well as organic and acquisition growth.
With that I'll turn the call back over to Ken.
Thanks, Bob I want to spend just a few minutes on the innovation pause. This is something that we've encountered before to varying degrees for example back in the second quarter of 2017.
We are nearing launch of the LTE cellular radio, which was an advancement from the Threeg radio that preceded it.
Customer is treated the upgrade like you potentially would when you need a new cellphone you likely would not have bought a new iPhone last summer and knowing that the iPhone excess will be coming out in the fall and that contemplate say, a two year two or three year investment cycle versus the 15 to 20 years that our utility customers are contemplating.
Further the example, moving from Threeg to LTE was meaningful but the move today from LTE either LTE M is much more significant the added features and benefits from utilizing the low power wide area network are understood and valued by our customers. So the incentive to wait while also pilot testing the solution prior to broader system wide deployment is greater.
Turning to our commercial meters, while im disappointed in the delay of the three and four inch E series meters with the flow technology, we are being prudent and advancing the testing and launch process meticulously quality is a hallmark of our products and solutions and it's not a coincidence that it comes before delivery and the Sq DC or safety quality delivery and cost metrics that we managed by.
Looking ahead, the meaningful wins, we announced earlier this year, which were slated to begin shipping in spring and summer are now expected to begin toward the end of the third into the fourth quarters.
As we remind investors contract wins and not necessarily determine order rates and shipment timing and our customer centric mindset puts their requirements is top priority.
These examples reinforce my Badger meter remains and long term focused and does not attempt to provide quarterly guidance.
Finally, turning to slide six as we move into the back half of the year. We remain encouraged by the quote activity opportunity funnel in backlog to support our growth plans. In addition, I remain positive on municipal spending trends and our competitive share and positioning.
Q3 will again have a middle east difficult comparison, and the innovation innovation pause will be more of a dialed in an on off switch.
Execution on our strategic initiatives continues we've made several organizational structure changes and functional areas to better leverage resources and best practices across regions and product lines.
We are revamping our product development Phase Gate and project management process. We are deploying working capital management actions that increased turns while also improve our environmental footprint and we continue to garner ideas for and dialogue with potential acquisition candidates in closing I want to thank our employees across the globe for their customer focused efforts and commitment.
With that operator, please open the line for questions.
Thank you at this time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q and a roster.
Your first question comes from the line of Chip Moore with Canaccord Genuity. Your line is open.
Good morning, Thanks, Hey, good morning job and Karen.
Hey, Good morning, you can expand on on your can you hear me.
Gotcha, Okay great.
So maybe you can expand on your comments.
On the innovation Paas being more of a dial.
Than an on off switch.
If we take into account.
The series delays.
In addition to.
To the Pas are saying on LTM, how how best we can think about that at least in the back half of the year.
On year over year comps.
Yes, so chip in the back half of the year, we do expect to return back to growth mode, but what I don't want to do is is imply that it's a stacking right where what what moved out of Q1 Q2 is just going to naturally land on top of Q3 or Q4. So we're very confident we have specific targets of customers that are that are piloting. These that were very confident they are going to move forward with I just would caution you that it's not a stack bar in Q3 and Q4.
Understood that makes sense Ken.
We didnt talk a lot on the industrial side, but.
You called out some weakness there that was sort of broad based.
You can expand on.
Whether you're deemphasizing, some markets or things have worsened a little bit like we've seen sort of in the broader.
On macro and your outlook on the industrial side.
Yes on the industrial side Theres Theres, a little bit of the law law of small numbers right. So remember that's a relatively small part of our business. So it's easy to.
Have those numbers move one way or another pretty quickly.
That's also part of our business that has more of our international exposure. So just in general were seeing a little bit more noise market wise, there, but I still feel confident about our ability.
To work, our channel and still feel relatively good about our prospects there going forward, even with some of the global noise.
But to your point that end Mark to your point on end markets Chip, Yes, we clearly continue to execute the strategy of focusing on the four key verticals that we've talked about and that remains the focus.
Got it.
Maybe one last one on me.
International I guess, particularly middle East, we still have some tough comps, but how do you think about the multi year potential there and traction.
And those type of markets.
Yes, yes, so so we feel good about the long term middle east opportunities. So we never.
Expected that it would just be a continual same year quarter over quarter growth. They are going through a three to five year deployment in the GCC.
On smart meter. So we had we had a good win last year that was primarily second quarter third quarter, we're still optimistic about the future but.
I can't I can't say predict when that next order comes.
And I guess, perhaps just to quantify that I think on the last call and consistent with what we experienced in the quarter the hurdle rate or the at the the amount to overcome for the second quarter was just north of $2 million and for the third quarter looking forward that hurdle is roughly a $3 million.
Got it Thats very helpful.
Ill pass it on to someone else. Thanks, a lot guys alright, thanks, Jeff.
Your next question comes from the line of Ryan Connors with Boenning and Scattergood. Your line is open.
Great. Thanks for taking my question.
Yes, good morning, Ryan good morning.
So, yes, I wonder if I want to focus a little more on the cost side I Wonder if you can give us a little more granularity around the margin drivers in the quarter very strong gross margin performance, especially in light of a.
Softer topline so.
Maybe Bob if you could just give us more the puts and takes about about that as it relates to raw materials and mix and.
For what the relative importance was there.
Yes, so again, we try not to and have not historically commented on individual components, but I'll try to give you color to sort of frame out the magnitude. So primary again of the drivers the largest driver in the quarter of the 240 basis point expansion in gross margin.
Is mix and so I would break that into really two elements. The first is product mix, so where we while we were down overall, where we did see growth was in higher margin profile products like ultrasonic meters meters with radios and then certainly beacon software as a service. So those tend to be above line average so you'll see some margin accretion from that the second piece of mix is really regional mix. So while we had to overcome a tough comp with $2 million of middle East sales a year ago as everyone knows.
Those were below line average sales and so that Didnt recur.
So that's kind of a mixed story within the cost bucket or price cost bucket certainly we've got an element of our business will albeit small that is linked to list pricing.
On the water utility side about 25% of our business is through external distribution, which has a closer tied to list pricing and again, we've done a price increase on January onest in that line of business and then on the flow instrumentation side, we've done a price increase in October of last year. So you see small amounts of price that's naturally coming through as a result of those.
But really it's on the cost side not in this or the price equation, but the cost side copper.
Pam.
Again, if you just look at copper as a proxy for our input kind of in the 280 range now versus a year ago being.
$3.10 $3.15, so thats the cost element, but the other important pieces, while we did see order deferrals related to the launch of LTM. We did launch the LTM and so that radio as we've talked about historically as a lower cost position and so while the volume is wasn't as high as we would have liked we did report cost benefit from that improved cost position. So when you add all those together.
That's really what's driving kind of the different components of of a of a gross margin improvement year over year.
Thats great detail, thanks very helpful. There.
My other side, which is just as good on the on the income statement the DNA line as well.
Very strong cost control basically flat year over year. It seems so is that just a function of the lower.
Sales in the selling aspect divesting today or or.
And hence we would expect that the flex back up as we get a sequential improvement in the topline or is some of that savings on SGN a going to be.
Yes, we're going to keep some of that.
Yes, again, I think the phenomenon you're seeing there I would say there is nothing thats a real outlier per se in terms of being extremely variable are tied to cost reduction other than the things you'd naturally expect the piece. That's that's influencing that is again the executive.
Overlap costs, if you recall, we've talked about in the past having multiple executives in positions a year ago.
And then that going away in this year and so that piece will certainly continue.
But yes, very pleased with the cost management exercises and the cost management initiatives in the quarter and we would expect that to continue in the second half.
Okay and then one last one from me just on.
On the on this issue of technology and the Rollouts in the pilots I mean.
Obviously the pilot projects moving ahead successfully is a great sign.
Can you just educate us a little bit on that decision process by the customer.
When and how those turn into full blown rollout and how we know about that to gauge. It I mean will you be putting out.
Announcing.
Wins of a certain size.
How can we kind of just just gauge that intra quarter.
That progress from pilot into hopefully a full blown rate full blown rollouts in some of those cases.
Sure, Yes, Yeah, let me give it a shot it it's pretty difficult Ryan as you can imagine so as you saw earlier in the year, we did announce a couple of.
Larger city wins.
And we will continue to do that but I wouldn't call that a habit.
It's it's significant.
One off type decisions on whether or not we announce it but we have pilots going on in many cities of all sizes right. So it would be very difficult to to be able to give you quarterly type updates on how thats going but how the decision is being made right is cities are looking at going from the traditional meter to the meter plus the radio plus the software as a package and a lot of implications in that we see now legal gets more involved in some of the discussions and the upfront rollouts.
People are looking to integrate billing systems and it's just it's a bit of a more complicated.
Transaction for the customer perhaps than it was because of all the aspects they have to pull together. So part of what happened in Q2 here is that when customers are going through that right. They don't buy the radio but at the same time, they don't buy the meter they don't do the beacon engagement and and Thats, where we kind of get into this what we're calling this innovation pause. So so weve had no issues.
You know that we've heard from customers in terms of any quality problems concerns.
Bob and I were on a customer too or during the quarter were out at the show. We recently participated in the National conference of mayors and we're getting a tremendous amount of feedback that's very positive on our product offering and services. So that's where some of our optimism.
A large part of our optimism is coming from frankly on why we feel like we are going to be returning to growth and doing really well with the rollout.
Long answer not sure I answered your question, but I think it's it's kind of a multi variable situation.
Yes, no that is helpful. Thanks for your time this morning.
Sure. Thank you.
Your next question comes from the line of Richard Eastman with Robert W. Baird. Your line is open.
Yes, good good morning.
Hi, good morning.
Just.
Quick.
Maybe just that if you would but the utility business what percentage of revenue was the utility business in the quarter.
I mean, I'm pegging at about 77% of total rooms.
Yes.
Yeah, I don't have it in front of me, but thats reasonable and pretty consistent with where it normally has yet.
Okay, and then the Muni.
The commercial piece of the Muni your utility business, how did the commercial piece do here, we didnt yes.
Good.
Yes, so commercial so if you take the line average of what we are down.
Residential was down slightly more than line average in commercial is actually down slightly less so so what what I think about that Rick is that.
Even though.
I'm disappointed that we didnt get to shipping three and four inch ultrasonics and second quarter like like I was expecting.
We're still selling a lot of mechanical commercial meters. So we were down slightly but yes. It's I think it shows again, the product breadth and quality of being able to offer mechanical and ultrasonic.
As really the winning play for us so it was down slightly but.
But but certainly not not out of line.
Okay.
Would you consider the market to have been down I mean, the commercial market I mean, just given nonres construction.
The commercial construction market places.
Does that surprise you at all or.
Well so so that's a that's a tricky question I I think I don't I wouldn't comment I guess on whether or not I think it's down I think it's just okay.
Okay, Okay alright.
He isn't.
Just to circle back for a second do the projects that we won earlier in the year. The two that were little higher profile.
And then the one the one that we won here we stumbled into in the second quarter Elizabeth City.
I'm just curious the delays on those projects.
Is that is you know was that at all weather related or is this just the process of.
Muni is getting funding and starting starting the projects I mean, what actually do you think kind of caused the delays there.
Yes, I think you're specifically talking for us about Aurora and Colombia and.
Part of it is just that it's it's a pretty complex as I was mentioning a little bit before right. So they're doing.
Pretty significant pilot testing on a large number of units, making sure that their system works correctly, making sure that they have their billing integrations, there theres a buildup of meters and radios that goes in the front of that and what we're going to see is one of those projects will begin to see some installation and some revenue.
During Q3 and then the other will begin during Q4. So it's just the natural state of again, a more complex integration them when people used to buy meters and just put in the ground.
Yes, Okay, Alright, and then was it referenced earlier to your calls I think.
The reference was that.
Only 25%.
Of your utility business goes through distribution and I am curious that must be independent distribution, so you're kind of pulling from that number the.
The you know the distributors that have been purchased by managers that.
Is that how to reconcile that number.
That's correct yes.
Okay. Okay.
And then maybe my last question just just around the seasonality.
You third quarter typically sequentially from the second to the third your sales you kind of hit a little bit of a summer low.
And.
They are typically down kind of low single digits sequentially and what I'm listening to I know, we've got the mid east comp is slightly tougher in the third.
In some of these delays you talked about some of the projects starting up maybe later in the third if not for that.
So is it should we just be thinking about the same.
Seasonal.
Softness off of this lower revenue second quarter play out into the third.
Is that how is that kind of how the tone of the market is when you take out some of this noise around delays and project driven revenue it feels.
Yes, we kind of were light in the second quarter revenue with seasonally here into the third quarter.
It's probably very seasonal pattern.
Yes. So there is a multitude of factors and then it starts to break down by regionally right. So if you talk about the two projects that were referencing it's in areas that when they're starting the weather isn't necessarily bad right. So they can work there you go out to the East coast and you have a lot of budgets that.
The fiscal year starts in July so they tend to pick up in Q3, and and so so again multi variable problem, but yes, I think this year just because of some of the deferments, we're going to have a little bit of a different profile than we would have had in the past, but the general thinking that you're applying to it I think I think holds true, but but we see direct line of sight to some some.
Yes, smaller mid sized type opportunities that that we think will will return to growth with.
Okay.
And just maybe one last question sorry.
Let your time here, but my last question just as around in this E meter markets.
You know going back to last fall and we saw the American water works Association kind of put out some E meters.
Specs if you will.
But is there any have you noticed any change around.
The number of bidders on some of these projects or be it from the Elizabeth City contract that you know, we we bumped into would look like.
Theres no degradation in pricing by end point, but just any any competitive noise in the E meter market.
That was triggered maybe by ADW W.A. kind of just.
Supporting some rigs there.
Yes, so it's a little bit about that so so first off let me just say that we have a very robust competitive review process. So we know who the other players are in the rest of the world that might think about trying to come here. So this isn't.
New news to us that people would try to come here. So so thats one and then two we are at Ace. So anyone who is at a saw all the booths of all the little guys that say they are going to come over here also right.
So so we know who the competitors are we know who is on all the bids that are there.
Frankly, we still feel very strong whether the AWB W.A. guidelines support ultrasonic or not.
85% of our revenue is still mechanical 15% of I'm, sorry, 85% of our units are still mechanical 15% of our ultrasonics are still 15% of the units our ultrasonic.
Coming in with a partial line against.
Really strong competitors who've been here 100 years trying to sell the 50000 municipalities.
Yeah, that's a long pot right. So so we're aware of them, we know who they are and we know how to fight against them.
I would say, thus far they're not making they're not making much of an impact, but they're trying hard.
Okay, Yes, no that's fair, Okay, alright, great. Thank you much.
Yeah. Thanks, Rick.
Your next question comes from the line of Nathan Jones from Stifel. Your line is open.
Good morning, everyone.
Good morning Nathan.
Just a.
Couple of clarifications here, you talked about growth in growth in the third quarter growth in the back half you talking specifically about domestic municipal or is that inclusive of the headwinds that you've got from the middle East.
Great, great and inclusive of the flow instrumentation business as well.
Yes, so great question, yes, thanks for asking for the clarity on that I'm speaking that the majority of the optimism is around domestic utility rights of the Choppiness on the Middle East Order I just don't have the visibility. So so talking about returning to growth there and still feeling like yes on the on the flow instrumentation business will be able to get back into a growth mode in the second half.
Okay, So we shouldn't necessarily.
Expect that total municipal water business to be to show positive growth in the third quarter with that headwind from the middle East.
Yes, I mean, just frankly, you know we don't have the order yet from the middle East So the ability to turn it and do something meaningful in that market. This year.
Would be difficult.
And then maybe just a bit more of a clarification on flow instrumentation. I mean, you are selling into a bunch of markets. There that have been pretty weak macro data has not been a I wouldn't say that constructive here over the last few months couple of quarters.
What gives you the confidence that you can return to growth there aside from an easy comparison.
Yes, so when we look at the channel opportunities. We have there is still huge markets and we're still very small right. So so I think that we can still find.
Some pockets of opportunity in there our team is working really hard at building out the channels in the four target markets that we talk about being oil and gas can petrochem wastewater and HPC.
So yes, you are right I mean, the markets and the day that don't look great in that space, but but we're we're feeling good about the activities that we are taking to return to some growth there.
Okay, then maybe just.
A couple of follow up questions on the DLT.
The shift to LP and can you remind us when that hit the market.
Yes. So so we officially launched it in March and began shipping in April .
Would you why didn't we see some of the kind of innovation pull as Dan in the first quarter of 19 of fourth quarter of 18, if folks you that those kinds of made is we're going to be coming out and hitting the market.
Yes towards the end of the first quarter of this year I would expect to see more of an impact on that business a little earlier than just say pull it off.
Well, we did talk about that briefly on the last call and we did have I mean, frankly, I am not going to name names, but we have we have a really good customer that's been with US a long time, that's going to convert that intended to go in Q1, but still didn't think you too because they are piloting. So so there is some of that in the Q4 and Q1, but.
I think if you go back and read the first quarter transcript that was a theme in our first quarter results specifically, so it isn't necessarily something thats just hitting now it's something we've had line of sight to.
Quite frankly for the last five to six months and has been talked about.
Okay. That's helpful. Then maybe you could comment on what gives you the confidence that these kind of pause is going to end.
Oh or has ended and we actually get back to.
To growth in the third quarter.
Well so so the two projects that we spoke about previously that that start to.
Start to take off in Q3 and Q4, some specific cities that we've been working with that that we know that we're very close at getting over the initial phase and into the order.
Orders state.
And the thing to remember is.
While the percentage.
I understand that the tone of the questions from the percentage of the down year over year.
But when you look at the funnel and the way that we're seeing these a couple of these our size is that just a couple of cities can close that gap all right and we have some of those types of opportunities in the funnel.
Fair enough do you think that there will still be an impact from these kinds of deferred purchases that are going on in the third quarter, but you've got enough in the final to get over the hump and still get to growth or do you think that they see these kind of correct the drag that you're seeing.
From these deferred orders will is actually out of the picture here.
Yes. So this is a yes very similar to the point I made in the opening comments of.
We have enough in the funnel that we feel pretty good but there might be some that still you know still wait. So this is the more of a dial and now to stack bar or an on off switch right. So so some are going to come in but we feel really good about the funnel and the opportunity to to get that growth.
So it should build up for me and then I guess is kind of what you're saying.
Yes.
Hi, Thanks, very much for the clarification I appreciate it.
Yes. Thanks.
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your next question comes from the line of Andrew Buscaglia with Baron Berg. Your line is open.
Hi, guys. Thanks for taking my question.
Sure. Thanks.
Yeah, not to beat a dead horse here, but on that.
On the.
Yeah, the order push out.
So I'm just trying understand that you mentioned.
Things won't stack.
You know in the back half.
So it sounds like you have some expectation for Q3 and Q4, what's the flow through.
But im trying understand there.
Why wouldn't.
Will there be some sort of incremental.
I guess bump.
Thanks.
Yes. So you know again back to the total amount that are in the funnel.
We fully expect that that some of those.
Based on the feedback from the sales team and indirectly that those are going to start to start to flip through.
What this business can tend to be uneven by nature and customers make decisions sometimes that.
That maybe it doesn't happen as quickly as we'd like so what I don't want you to take away from this call is that everything that we're saying that was deferred from quarters. One and two is just going to add on top to whatever we expected from Q3.
Okay.
I think the other.
The other challenges Andrews.
Obviously, we've got line of sight to a really till the short cycle backlog. We know these two key projects that we've been talking about and how those layer in.
What we're talking about on the rest of the business right is.
15, 2025 opportunities that the quite the questioning of the trying to get us to predict.
Two a month, that's just very difficult to do which is really only reinforces our ongoing concept of it's a choppy business and unfortunately that really gets it makes it difficult to make these predictions quarter to quarter. So I think we think about.
Longer periods of time, and if we make that longer period of time, the second half I think thats, where the confidence from our commentary comes from but it is difficult to sort of.
Your marker pigeon hole that into a specific quarter. So we want to make sure we're not losing sight of that but also trying to provide enough clarity without giving guidance, we don't give guidance.
Yep Yep, Okay makes sense.
Okay and.
You know you're starting to build some cash here and you had a really strong quarter for free cash flow conversion.
Curious if you give us an update on what you what your use of cash will be over the next six months to do things does anything change in light of that or.
Kind of disappointing Q2 or.
All right.
His M&A.
You know still priority for you guys.
Yes, so as our cash priorities remain the same so we're going to continue to invest in internal R&D too.
Maintain our innovation leading the industry.
We are going to continue to to fund and increase dividends at the rate of earnings increase and M&A is a strategically important pillar for us. So so those are the three priorities for us those those don't change just because we've we've turned into a net cash position.
Yeah, Okay, all right. Thanks, guys.
Your next question comes from the line of Richard Eastman with Robert W. Baird. Your line is open.
Afforded dense very much back with it.
That's okay.
One more thoughts just around.
That what is the kind of the health of the acquisition funnel that you have you know either number of opportunities or or just steps forward on any anything in particular, what does that look like here year to date.
Yes, so the health of the funnel Rick is solid and we are talking to companies that are in the.
The strategic lane ways that we've talked about previously.
I think the thing that.
That I would just tell you is that we are we are.
Sorry, the lights are flickering as sort of the power goes out it's not that we try to avoid you Rick.
[laughter].
About five miles from you my lights are fine yeah. Okay. Yeah. So so so the funnel is active the funnel feels pretty good but we are just being very strategic and methodical and making sure that the cash that we deploy are things that are going to fit into our strategic lane ways that we know we can sell through the channels that we have or lead to that global expansion. So the funnel feels good.
But as I've said on previous quarters, I don't want you to walk away thinking something's eminent.
Okay, Okay, but doing that there is opportunities there and.
And.
Some things are moving forward.
Correct, yes.
Okay, great. Thank you.
Great. Thanks.
There are no further questions at this time I turn the call back over to Ms. Bauer.
Well, thanks, everyone for joining our call today for your planning purposes, our third quarter 2019 calls tenant doubly scheduled for Thursday October 17.
I'll be around all day to take up in any follow up questions. You may have have a great day.
This concludes today's conference call you may now disconnect.