Q2 2023 Enviva Inc Earnings Call
Good day and welcome to the <unk> second quarter 2023 earnings Conference call.
After today's presentations will be an opportunity to ask questions.
Got it.
Oh, yes.
All right.
<unk> President of Investor Relations.
Thank you good morning, everyone and welcome to be the second quarter of 2023 earnings Conference call.
We appreciate your interest in and supportive Anita and thank you for your participation today.
On this morning's call, we have Tom Smith, President and Chief Executive Officer, Shai, even executive Vice President and Chief Financial Officer.
Our agenda will be for Thomas and Shai to discuss our financial and operating results and to provide an update on our current business and outlook for operations.
Then we will open up the call for questions.
During the course of our remarks and the subsequent Q&A session, we will be making forward looking statements, which are subject to a variety of risks.
Information concerning the risks and uncertainties that could cause our actual results to differ materially from those in our forward looking statements can be found in our earnings release.
Well as in our SEC filings.
We assume no obligation to update any forward looking statements to reflect new or changed events or circumstances.
In addition to presenting our financial results in accordance with GAAP. We will also be discussing adjusted EBITDA and certain other non-GAAP financial measures pertaining to completed reporting periods as well as our forecast.
Information concerning the reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and other relevant disclosures is included in our earnings release.
SEC report earnings release, and most recent investor presentation, which contain reconciliations of non-GAAP financial measures. We use can be found on our website at him be the biomass dot com.
I would now like to turn the call over to Thomas.
Good morning, everyone and thank you for joining us.
As you saw in our press release and 10-Q filed yesterday, we've made good progress over the last few months.
You will remember from my last earnings call in May did coming out of a very difficult and disappointing start to the year, we embarked on a focused journey to drive cost out of the business and increased production levels at our current plants.
In May I personally took over the leadership of our operations team and we have since made a number of important changes to start regaining the ground needed to return to levels of profitability, we have demonstrated possible.
As part of the changes needed to turn on our cost position around we recently executed a corporate restructuring.
That is designed to reduce annual operating and overhead costs by $16 million.
And which is expected to get our SG&A back on track for a company of our size.
We should see some small cost savings uplift to our results in the back half of this year with the full benefit of these changes expected to materialize in 2024.
We've also made good progress with reducing the cost to produce and transport of wood pellets to our ports, we reduced our delivered at port cost or D. E. P cost as we call it by $3 per metric ton for second quarter 2023, as compared to first quarter of 2023.
And more importantly, our E. P cost for June was down by $9 per metric ton as compared to the first quarter of this year.
Our D N P cost position for June was the lowest we've seen in over a year.
Results achieved in June are a good sign and with what we're seeing so far in the early innings of the third quarter they appear to be continuing to improve.
We are on a path to improve our annual operating position by $100 million and I'm encouraged with the progress we're making but there is still a lot of hard work left to do.
And we are monitoring and managing very closely.
Last quarter.
We reset guidance expectations for 'twenty, 'twenty, three and provided quarterly expectations for the remainder of the year.
For the second quarter, we set a target range of $20 million to $30 million of adjusted EBITDA.
And yesterday, we reported results in line with this range with second quarter, adjusted EBITDA of $26 million.
During the second quarter, we made strides with reducing our cost of delivered fiber as well as improving our cost discipline around the repairs and maintenance.
We also successfully worked out all of the unnecessary contract labor that was weighing on planned financial performance.
Those improvements were somewhat masked by fairly large planned outage at our Waycross, Georgia facility when.
When we acquired weight crossing 'twenty 'twenty, we plan to undertake this outage within two or three years of owning the plant at this past quarter, we completed that plan and waycross was back up and running by June .
One of the key maintenance projects at Waycross was to replace emissions control equipment and the new equipment should last for the next 10 years or so.
It's important to note that since Waycross is currently the largest plant in our fleet and is one of the best performance from both our production and cost perspective, the outage dampened our typical run rate of produced volumes during the quarter by about 30000 metric tons and muted some of the production and cost improvements.
We were making at our other plants.
Through the plants, we talked about having challenges with last quarter, where our south Hampton, Virginia, and Greenwood South Carolina facilities.
Prior to the operational changes that started to take hold in June South Hampton had been operating unprofitably for a number of quarters.
In June we decided to change the way we are operating Southampton for now we're running the plant with only one of the two dryers generating around 65% of the plant's capacity at a much lower cost.
With this production profile, we were running a plant in a very similar manner to our husky one of our lowest cost profile plants in our fleet.
This gives us time to fix the underlying issues as well as to evaluate the best path forward.
For this plant.
Our Greenwood plants problems are different than less systemic in south Hampton, we were able to make small changes to a few process Island bottlenecks.
Which have since raised production rates at the facility.
We also are implementing a change in fiber procurement strategy of Greenwood, which includes procuring more hardwood because of its increasingly greater availability in the area. These two changes have improved the throughput and cost position over a relatively short period of time.
As a result Greenwood is on a path to reach its targeted production levels and cost position during fourth quarter 2023.
As we look to the second half of this year and what we expect to achieve we are maintaining our full 20 twenty-three adjusted EBITDA guidance range of 200 million to $250 million and we are updating our quarterly expectations for third and fourth quarter adjusted EBITDA.
For third quarter, we're stepping out our expectations from the previous range of $70 million to $90 million of adjusted EBITDA to a range of $60 million to $80 million, primarily as a result of two factors.
First we decided to extend the maintenance outage at our Hoskin North Carolina plant.
Lay the ground work for the previously announced expansion that we plan to do at a housekeeping. The expansion when completed is expected to increase production capacity by approximately 45% of the husky, which is one of the lowest cost positions in our fleet.
And second as we entered the back half of the year, we update our shipping schedule, we bushel Aiken windows over a couple of ships from late September into early October .
And they have shifted the revenue and margin associated with those ships from third quarter to fourth quarter.
With the updated expectations for fourth quarter, along with commercial opportunities, we expect to materialize.
We are raising our adjusted EBITDA expectations for the fourth quarter to $120 million to $140 million up from $110 million to $130 million.
The significant step up in earnings expected in the fourth quarter over third quarter.
Is underpinned by number of factors that we have good visibility into such as.
Higher contract prices during the fourth quarter, we deliver on a higher percentage of more lucrative contracts and we also have successfully repriced select legacy contracts and are in negotiations to reprice other legacy contracts.
And the other pricing dynamic is that by the fourth quarter all of our contract escalate as related to 2022 inflation will be reflected in our headline prices.
And in addition, we're working to drive an incremental 14 to $19 per ton out of D. O P costs.
Additionally, we're seeing small but steady increases in the production for about current exit fleet.
That will primarily benefit the fourth quarter.
With Southampton on a path to recovery Greenwich challenges mitigated and incremental production process and cost improvements across our asset fleet and corporate offices.
We are determined to drive significant value from the payer wins supporting a very strong back half of the year.
With that I'll turn it over to Shai to go through our financials in more detail.
Thank you Thomas and good morning, everyone.
Let's start with our second quarter results.
We generated net revenue of 201 for $9 million for the second quarter of 2023 as compared to $296 3 million.
For the second quarter of 2022.
Net loss for the second quarter of 2023 was $55 8 million as.
As compared to a net loss of $27 $3 million for the second quarter 2022.
Adjusted gross margin for the second quarter of 2023 was $41 4 million as compared to 54 $8 million for the second quarter of 2022.
The $13 $4 million decrease year over year is attributable to two main factors.
First we received $6 million of both payment in the second quarter of last year that we did not receive in the second quarter of this year, which was planned and part of our expectation given the payout and.
We though simplification transaction in October of 2021.
And second we had IL shipping costs compared to the second quarter of last year, giving the fact that we have more deliveries going into Japan this year versus last year.
Adjusted gross margins in Mexico, one was guilty $1.80 for the second quarter 2023, compared to $42.94 for the second quarter of 2022.
Adjusted EBITDA for the second quarter of 2023 was $26 million.
As Thomas mentioned.
This compares to $39 5 million for the second quarter 2022.
And at $35 million decrease year over year is attributable to differences in support payments and shipping costs.
And we've as liquidity as of June 30th 2023 was $565 6 million.
Which includes cash on hand, including cash G&A logistics did to funding a portion of the cost, although <unk>, Alabama plant and bond, Mississippi plant and availability under our senior secured revolving credit facility.
On the topic of Epson bond, we recently applied for advanced energy projects tax credit included as part of the inflation reduction incentives.
If we are successful we could be awarded text graded that can be monetized for value from 6%.
Two up to 30% of the total eligible capital investment cost of each project.
Given the timing of cash flow spending Kevin related to Epson bond, we have lowered our full year 2023 total capital expenditure guidance range to 335 million.
Two $265 million.
Or 10% at the midpoint of the ranges.
Payments related to our Epson bond capital projects are pushed out to future periods as compared to a pile of estimates, but did the fill of cash outflows does not impact the timing of our planned in service date of mid 2020 full full ebbs and mid 2025 foot.
Bond.
Oh, the fell over the timing of certain greenfield spend items.
Was somewhat offset by a higher spend on expansions and productivity improvements within our existing asset fleet.
We are now projecting to spend between $75 million.
And $85 million on small capital projects up from our previous expectation of 50 million to $70 million.
Part of the increase of this category of capital investment is related to the acceleration of work being done at all Husky plant.
We continue to expect to spend approximately $20 million during 2023 on maintenance Capex.
Our commitment to conservatively managing <unk> balance sheet remains unchanged and we continue to target a long term leverage ratio of three five times to four times as per our credit agreement.
We may exit 2023 around five times pillar create agreement depending on the timing of working capital given how much activity is planned for the fourth quarter of this year.
But it will be temporary and we will work to get back to our long term target range in 2020 full.
As a reminder, our Copa net ratio under the credit agreement is 575 times.
With that I would now like to turn it back to Thomas.
Thank you Shai.
Our short term focus certainly has been on improving productivity and reducing costs as quickly and durably as we can across our portfolio.
We've also been having constructive conversations with our customers regarding raising sales prices of some of our legacy contracts given at our whole industry has been suffering from cost increases that have outpaced sales price increases over the past couple of years.
We have an encouraging conversations on this front with our customers in large part because biomass is a very physical commodity that.
The long term demand growth profile for our business continues to be very strong.
Very happy to announce that we have sold our first two shipments to our new credit worthy European customer for delivery into Poland.
Which is a new and emerging market for us.
Poland is one of the highest per capita consumption rates of coal globally.
It has historically been very dependent on Russia in fossil fuels.
And because of those factors, we expect to see significant sales opportunities develop in Poland.
In Europe , the European Union is expected to finalize the text related towards renewable energy directive by October , which we expect will continue to provide demand tailwind, but what are your biomass given how important this renewable resource is to the net zero targets of the EU member Nations hour.
The industry continues to be persistently structurally short supply so signing new contracts into new jurisdictions, such as Poland means that new production capacity must get built.
Thus these new contracts are underwriting our large scale fully contracted capacity expansions.
As a reminder, our new capacity is modeled after lucedale carbon Leland Waycross, which are our best performing plants currently our apps, Alabama plant is under construction and progressing well <unk> continues to progress on schedule and on budget and is expected to be operational by mid 2020.
Four.
For our bond, Mississippi plant, we're moving forward with partnering with an EPC firm.
Which will help provide cost and construction certainty and we expect to have an EPC contract finalized by the end of this year.
Because in vivo top financial priority is effectively managing liquidity and leverage as we drive towards our profitability and growth targets. We're closely monitoring the progress, we're making with reducing our cost per ounce profile improving production rates of our existing asset fleet and repricing legacy contracts.
Better reflect our current operating environment.
To the extent, we're not on pace with reaching our targets, we have the opportunity to defer to build time enough bonds and moved the in service state backed by approximately six to 12 months without impacting customer commitments there.
Therefore, enhancing our near term liquidity and leverage profile and potentially reducing the likelihood of needing to access capital markets to fund any remaining needs related to bonds.
This deferral of bond timing would move the planned in service date from mid 2025 into 2026.
And on the topic of capital allocation, our top two priorities as outlined last quarter have not changed as I. Just mentioned, we remain steadfast in prioritizing effective management of our liquidity and leverage.
Secondly, we're certainly prioritizing improving our operating cost and the productivity of our current asset platform.
These have been and will continue to be our focus areas.
Last quarter, we announced that our board of directors authorized a share repurchase program today.
To date, we have not repurchased shares and our current plan does not contemplate repurchases for the remainder of 2023.
Once we make the necessary progress on our first two capital allocation priorities, we should be able to consider returning value to shareholders by using this tool opportunistically.
Before we open the call for questions ill give a quick recap of what we have discussed this morning.
To start off we achieved adjusted EBITDA for second quarter in line with our expectations and are reaffirming adjusted EBITDA guidance for full year 2023.
In the back half of this year, we are projecting a material increase in earnings and cash flow as compared to the first half of the year with significant cost reductions improved production and increasing sales prices.
Being the primary contributors to the project did step change in results.
The changes we have made over the past few months I've taken hold as evidenced by the advances we achieved in June and the performance we've seen in the first part of the third quarter and finally, our top two capital allocation priorities have not changed.
We're focused foremost on liquidity and leverage with improving our operating cost position and asset productivity, a very close second priority.
We have a lot of work to do to rebuild the strength of this company and capitalize on the growth ahead of us.
We know what needs to be done.
And those fixes are exactly what you will continue to see us execute over the coming months and quarters.
Now, let's open the call for questions.
Thank you now begin the question and answer session.
Ask a question you May press Star then one on you touched on phone.
A speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
We will pause momentarily to assemble the roster.
Yeah.
First question.
Yeah.
The first question will be from Jordan Levy Truest. Please go ahead.
Good morning, Al and I.
I appreciate all the commentary you provided.
Talking through the initiatives that you're working on maybe if we could just dig in a bit.
To the <unk> and I guess subsequently the <unk> Guide you mentioned a few factors that are driving the big uptick in <unk> can you just help us quantify how to think about the benefit of.
The cost reduction versus the higher price that you expect to realize it then what goes into that I think 14 to 19 dollar reduction in <unk> that you talked to.
Yeah, Jordan absolutely good morning, and thank you for the question.
The buckets that where we're seeing here is follows right we are.
First and foremost, we're expecting that south Hampton to be in a very different spot.
Going forward.
In Q2, Southampton was still a $5 million drag and we expect that to end and the plan to be breakeven for the second half of the year.
That's.
That's not the final stage of that plant, obviously, we expect it to come back to profitability, but that's where we are is included in our forecast for the second half of the year.
The.
When you when we start for Q3 first strides so $5 million for South Hampton.
And our cost management will certainly be in.
Another big bucket.
Repair and maintenance contract labor.
Will be lower than in Q2.
What we have started in June we will certainly.
Continue and will drive costs lower.
We're certainly going to see.
Higher fixed cost absorption, that's another bucket equal size bucket in Q3 over Q2.
We expect to make an incremental 150000 metric tons.
That will reduce fixed cost absorption certainly in providing incremental margin by shipping incremental shifts to our into our contracts.
And then we do starting to see a revenue optics through some of the.
Higher priced contracts that we typically see in the second half of the year, it's much more pronounced in Q4 than in Q3, but certainly.
Is really starting to drive incremental margin in Q3.
If we then go through Q4 and take Q3 to Q4.
Again reminder, we still have south Hampton.
Losing money.
We talked in Q1 about a shift of a customer up $16 million to Q4 that is or to the second half that is coming through in Q4. We're.
We're going to see an incremental.
The remaining buckets are.
Cost management will drive all of another.
Again to Mt.
And we.
We will have we continue to have highest sales volumes that I'll unpack a little bit more.
Have some small growth projects in.
We are executing against small.
Growth projects, which are very accretive in both lucedale and cotton deal for.
For example, we are adding two pellet presses at Lucedale.
And Amy Marie and I'll hop back in service, that's going to be a significant uplift for the second half of it but Q4.
Then we will have and that's that certainly at least half of what we're going to project for the step up in Q3 and Q4 is.
We have changed contracts reprice contracts in the past that's flowing through.
We have generally.
Higher priced contracts that we didn't have to reprice they work.
Higher price to begin with and they are most pronounced in in Q4.
All the escalators are fully running through.
And then we have we've talked about the 20% of our annual EBITDA comes from general commercial activity that's back half weighted.
It's particularly pronounced in Q4 that can include some.
An opportunity to free up some volume to benefit from expected higher prices in Q4.
Nowhere near as pronounced as we have seen in Q4, if that materializes, you're certainly moving to the higher end of the range.
Got you I appreciate all that detail very helpful. And then maybe just a separate follow up just talking through some of the initiatives you're working on to bring up.
Profitability at some of the plants, just considering sort of the portfolio as a whole I'm curious how you think about as you go through this and you bring on new plants and that sort of thing how do you think about optimizing that portfolio or if you would consider selling down some of the lower performing assets.
Yeah.
Well look.
Based on what we've seen so let me take a step back here, we made very very significant changes two months ago right.
That is not a whole lot of time, but we've made incredible progress and we've really.
Created a bottoms up plan plant by plant as to how do we get every single plant to a profitable level right and every one of these plants.
Or is there or has that potential in a very short period of time to actually get back get back to profitability.
We don't that.
Capital required to get there is very small.
Plants can absolutely do this the way they are built.
With operating with a different level of accountability and with a different level of cost discipline and operational discipline.
So we have 10 plants in service.
And all of those plants will create profitability against our underlying contract book.
I think you asked specifically about apps I want to remind folks again that I feel really good about the way we are building apps.
<unk> good morning, and thank you for that question.
Well look I would love to reprice, a 100%, but that's not that's not the expectation right, we have repriced or create a different profitability.
A few of our contracts.
And.
The order of magnitude was around $20 per ton for these for these type of contracts when we're targeting 18 to $25 in increased profitability.
That will come through for example, different pricing, but theyre also value creation opportunities that we're having those and those customer relationships.
Like we have just announced in Q1.
That can drive incremental margin of 18 to $25 to these contracts.
We are making good progress.
This.
We're negotiating with multiple Counterparties, we expect some of that to actually start flowing through.
You know for the for the rest of the year.
And then as we complete that exercise over the next couple of months. We'll also be able to include that in when we are ready for 2020 for guidance.
And what that's going to look like on a sustainable go forward basis.
Okay.
Thank you and then.
Just help me understand the guidance for the rest of the year what percent of that.
Hum.
Thanks Al.
But that you referenced.
Look I think the way to look at this is that if some of that happens and as part of the commercial activity. It will it will happen in Q4.
And and if.
If we are successful and that certainly helps us to get to the higher end of the range.
That's the order of magnitude that we're seeing for that part of the business.
Okay.
That's helpful and then.
I know you mentioned that you can go for.
Yeah, the opportunity before our bonds.
When did you make a decision like that like what are the specific milestones you're looking for.
And when do you think you can take that.
Okay fair enough.
Yeah, absolutely so.
We are absolutely.
Keeping that.
<unk> plant on track, we're negotiating EPC contracts to give us full optionality that if we so choose to.
To execute a bond against the current plan.
But we as I've said, we have the opportunity to delay that plan by six months or about 12 months.
And that decision will be made at some point in the earlier part of next year.
Okay.
Great. Thank you I'll I'll circle back.
Absolutely. Thank you for your question till buyer.
Thank you next question will be from Graham Burke Raymond.
Raymond James Please go ahead.
Hi, good morning, Thanks for taking the questions.
I guess for my first one I was wondering if you're able to disclose the volume expectations.
They correspond to the <unk> and <unk> guidance numbers.
So we expect about a 10% increase.
From Q2 through Q3.
And then a little bit more than 10% from Q3 to Q4.
Okay, and again Thats got to drop that the drivers for that as I've said.
Our waycross back.
Back on track, we are seeing June over April and May really a step up in reliability of the plants that I think will continue.
That's we've really made good progress in a very short period of time.
We.
And in Q4, we have <unk> back on track our Hausky some of the growth projects that will drive that incremental 10 plus percent for the for the fourth quarter.
Understood and just to clarify, especially for that <unk> number.
That.
That number that growth number you gave is excluding any any spot sales.
Just kind of be on top.
Yeah.
Oh well.
What we've said is there's certainly a higher level of third party volumes during a purchase right I want to point that out and then some of the commercial activity.
If it happens if market prices do increase as we expect certainly can't give us the opportunity to get to the higher end of the range there.
Okay perfect.
And then.
For my follow up great to see you know the first sales into Poland.
Just curious if youre able to provide any additional color around pricing and contract lengths.
Any additional details.
Yes, absolutely.
I am very.
I'm really really happy about because we've been investing in the Polish market for quite a while and to see that materialize now is really something that debt.
That is a good next step we're selling two ships to Poland and there is a total of about 60000 tons.
We have said.
Previously that new contract the new contract environment that we're seeing certainly allows us to benefit from substantially higher pricing in new contracts that we've seen historically and that is also consistent with this Polish opportunity.
When you think about test shipments of 60000 tonnes you can infer infer that that's a lot for a test shipment.
And that means that they will but community for these kind of.
Off takes are larger volumes right.
Very quickly getting to.
<unk> million tonne opportunities here per project and we.
We understand that if the test is successful that.
We in the in the next couple of months, we'll see contracting activity in Poland pick up which will provide the opportunity to get to longer term off take agreements.
That debt with significant volumes with credit worthy counterparties in a new geography for us.
Great Great Yeah sounds.
Sounds like good progress. Thank you very much I'll pass it along.
Thank you very much.
Okay.
Thank you our next question.
Will be from Mark Strouse of JP Morgan.
Please go ahead.
That's what's drawn from Mark Thank you for taking our question.
First just wanted to.
Kind of some of the puts and takes in the 14 to 19 dollar reduction for the rest of the year and in the D. J P cards, but just wanted to focus right now on the on the fiber cross here how much.
Of that 14 to 19 is coming from fiber reduction and then you know given the lag that you have between between contracting the fiber pricing.
Andy or when it's recognized in your in your P&L do you feel like you have pretty good visibility into the end to end at the end of the year for the for the pricing impact there.
Yes.
Drew great to hear from you and thank you for the question.
So when you think about the I'll start with Q2, and then take it all the way to the end of the year right.
In Q2.
Fiber cost reduction was about 50% of the reduction that we saw.
And as we've previously discussed it.
It takes a month or two.
For the purchases across the.
The scale to actually turn into lower cost of revenues.
And so we're seeing that now in June .
Jeremy talk in May that what we saw come across the scale in April where they show progress and in June that actually then really flowed through and we will continue to see that.
We certainly expect some more fiber improvement, but most of the 14% to $19 will come from other buckets.
I and the other buckets I would say.
$5 of that will be increased fixed.
<unk> fixed cost management.
We're managing this business.
Very very tightly.
And what we're starting to see really take hold in June still has potential.
And that will drive five of the 14 to $19 out.
And then we have really demonstrated.
Increases in volume that leads to fixed cost absorption.
It's probably about half of the 14% to 19 and how fast we can get to the potential of these plants on a reliable basis will define whether we're going to end up coming out of this year at $14 90.
I would say that.
Previously when the less reliable.
Plant had a bad day. It was it was down for it for example, a day and a half now a bad day means we are losing a couple of hundred tonnes. A day is very very different already and what we're seeing come through in June and that gives us confidence that we're on the right path.
To increase volume and fixed cost absorption. In addition to some of the cost management improvements that we've seen.
Understood. That's very helpful. I, just wanted to circle back on bond quickly.
Okay.
Throughout the rest of the year is it fair to assume that's going to be.
On track from there or is there other things that are going into that decision and that we might not be able to see from here and then just lastly on that is are there any costs associated with the delay that that could that could weigh on our profitability.
Ah.
Don't expect any material cost for a delay.
Look I think if.
Aimed to our business that will generate the vast majority of our profitability from manufacturing wood pellets against our existing long term contract book.
And is that cost position sustainable.
Or exposed to variability going forward.
I believe that we can actually create those cost improvements in a sustainable way.
That we're not exposed from volatility going forward.
And if thats the case that will be.
Key input factor because that will give us.
The conviction of the credibility that we are back to where we were two years ago.
And and then of course looking.
Looking at the capital markets exit to that will define timing.
If.
If we need to supplement our existing cash flows with.
Good.
We will see certainly early next year, where we are and then we are.
I think in a very good position to make a decision.
Understood much appreciate it Thomas I will pass it along.
Yeah.
Thank you very much Jeff.
Thank you again hope you have a question. Please press Star then one.
Hi, everybody.
All right great Great question.
We recently decided that he was now the right time to.
To do what we needed to do at a husky.
The project will cost approximately $3 million.
And we're installing equipment, which prepares to site for upcoming capacity.
Expansion.
On the one hand for.
To show the blame them for a couple of weeks is never a good time, but we thought. This was this was really improving the optionality for us to think about the zone on a long term basis right. We have two this business has to be looked at from a long term basis and with preparing us for an expansion and installing the right then.
To maximize long term profitability for this business and that includes asking.
The.
The resources that were using are separate and distinct from all the cost reduction initiatives do not cannibalize each other if that's what you're getting at.
Despite the fact that we certainly reduced our head count.
Right substantially certainly not in those areas that are required to drive cost out of the business and complete that husky step change.
Okay.
Then a follow up on that in terms of some of the severance costs that you.
And with the $5 million that we have outlined for Q3.
<unk> focused.
Management of the plants.
Really had a positive impact on the morale in the operate on the operations team.
And I mean, when you go to the plants. The added to go get attitude of rolling up your sleeves and focusing on the things that matter.
That is really really nice to see.
So before and I exclude obviously the reduction in force, but we did see over the last two or three months turnover come down.
Positive form and we expect that trend to continue.
Great. Thanks for taking my question.
Absolutely. Thank you Ron.
Okay.
Thank you next question will be a falloff from Elvira Scotto RBC capital. Please go ahead.
Hello, Thanks for taking my follow up question.
Yeah.
Yeah, the muni bonds.
For our bonds and then when you think about financing at what rate.
And Trust me when do you expect to be able to talk.
Okay.
So first I think that we do still have like the proceeds from.
The <unk> exam.
The bond.
Mississippi plant available to us we haven't used the.
The proceeds then we do have that's part of the restricted cash.
That we owned at the end of the quarter, we have the cash available for debt planned and for the bundle and at the end of the call, though that was about 153 million.
We do have the potential of coming back to the market to the capital markets for the issuance of additional tax exempt bonds for the bond projects. Although we have seemed like the market conditions now and we'll blend those trading and we think that that will not be prudent to come back to the market now as a result.
Talking about the Thomas mentioned the flexibility that we have with the timing of when we're going to make a decision on when we're going to spend additional funds and make a final decision on investments and Boeing So we're going to look at what Thomas mentioned already.
And how we are executing our plan looking to see how our cash flow from operating activities in 2023 looking at the focus for 2024, and then make a decision about the timing for bond and the potential timing of coming back to the capital markets for additional tranche four of tax exempt bonds will.
<unk> tangible the bumps blend.
Thank you Elvira.
Hey, I'll just a quick follow up.
<unk> Jordan in regard to the field gross margin transaction, we did have like cash collected of about $8 million that is.
North part of <unk> for the quarter, but it's about the financing activities I would say that the way that we're looking at that we're looking at it more like an additional $8 million that should be like some economic perspective, because it's a collection of sales the customer should be viewed as a type of cash flow from operating activities.
That's helpful. Thanks, guys.
Thank you thank you Jordan.
Thank you.
A question and answer session I would like to turn the conference back over to Thomas Smith for closing remarks. Please go ahead.
Well, thank you for taking the time to join us today.
We look forward to connecting in the coming months to continue updating you on our progress, particularly around our on our cost reductions.
In operations and wish you a great rest of your day.