Q3 2023 Babcock & Wilcox Enterprises Inc Earnings Call
Okay.
Okay.
Okay.
Okay.
[music].
Good evening My name is Hannah and I won't be a conference operator today at this time I would like to welcome everyone to the 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.
Good.
Question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press the star key.
Thank you Sharon you May begin your conference call.
Thank you Hannah and thanks to everyone for joining us on Babcock and Wilcox Enterprises' third quarter 2023 earnings Conference call I'm, Sharon Brooks director of Communications joined.
Joining the call today are Kenny young BMW, Chairman and Chief Executive Officer, and Lou Salamone, Chief Financial Officer to discuss our third quarter results during.
During this call certain statements, we make will be forward looking these statements are subject to risks and uncertainties, including those set forth in our safe Harbor provision for forward looking statements that can be found at the end of our earnings press release and also in our Form 10-Q that will be filed today and our Form 10-K that is on file with the SEC.
And provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward looking statement.
We also provide non-GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our third quarter earnings release.
Published this afternoon and in our company overview presentation that will be filed on form 10, 8-K. This afternoon and posted on the Investor Relations section of our website at Babcock Dot Com I will now turn the call over to Kenny.
Thanks, Sharon and thanks to everyone for joining us today.
As you can tell by our earnings release, its been a busy third quarter for Babcock <unk> Wilcox.
Like to start the call today by first reviewing our third quarter performance on a continued operations basis accounting for the announced reclassification of our solar business as well as the latest advancements across our bright loop and climate bright initiatives.
I'll also discuss our announced strategic business realignment and the rationale behind that decision as well as details related to our 2023 and 2024 financial targets, which are based primarily on the strong performance of our aftermarket parts and services businesses.
Before turning the call over to Luke.
Let me start by highlighting the broad based activity that drove revenue growth across all business segments. During the quarter revenue for the third quarter was $239 million, which is 13% improvement compared to the prior year and our third consecutive quarter of revenue expansion on.
A year over year basis, our top line improvement was led by thermal revenues that increased approximately 17% when compared to the third quarter of 2022, followed by renewable more specifically, our renewable services as well as environmental revenues, increasing 11% and 4% risk.
Speculate.
Our aftermarket parts and services business in thermal and renewable tip typically are higher margin businesses.
<unk> to perform above our internal expectations.
Consolidated adjusted EBITDA from continuing operations for the quarter was also impressive at $20 million in.
An improvement of $7 million or 54% when compared to the same period last year. This is inclusive of roughly $2 million in expenses for bright looping climate bright in Q3 2023.
While product mix was a large factor in the adjusted EBITDA performance for the quarter attributable to the higher margin nature of our aftermarket businesses. We also demonstrated strong execution on increased volumes of projects within our environmental segment.
Yes.
While continued operations bookings and backlog were mostly flat year over year. This is largely attributable to timing of new bookings as negotiations on a few larger opportunities are taking slightly longer than anticipated. Some of these delays are positive due to increased scope for BMW aftermarket services.
As many utilities and large energy companies are reevaluating the timing of new build projects and deferring to upgrades due to higher interest rates and other geopolitical factors.
Our outlook for near term booking opportunities remains robust positioning us well to achieve updated backlog growth in a range of $550 million to $650 million by year end 2023 based on continued operations not including our reclassified assets.
In addition, based on our improved performance of thermal parts and services and our global reach and providing clean energy technologies, we remain confident in achieving our revised full year adjusted EBIT target from continuing operations of $85 million to $90 million in 2023.
When excluding bright looping climate bright expenses.
Transitioning to bright <unk> and climate bright commercial activities. We are pleased to provide several updates related to our hydrogen generation technology and project portfolio.
As previously mentioned, we are developing a small bright loop hydrogen production plant in Massillon, Ohio, very near our headquarters here in Akron.
We are close to signing a definitive agreement for hydrogen uptake of dislocation for up to three tons per day of hydrogen production for the next 10 years. We are also excited to announce we have a letter of intent for project level financing and we have signed a lease agreement and are moving forward with construction to produce hydrogen.
By the end of 2024 are very shortly or early into 2025.
With regard to our medium and larger platforms. We are also excited to announce a collaboration with air products, which represents a key step forward in our development of net negative carbon intensity hydrogen production facility in Louisiana, utilizing Brightcove technology more specifically, we have signed a memorandum of.
Understanding with their products to enter into a definitive offtake agreement for up to 200 tonnes of carbon negative hydrogen per day as well as the Sidoti produced at the facility with the initial production facility expected to be operational in late 2026.
This comes on the heels of our previously announced offtake agreement with general hydrogen to acquire both hydrogen and cotwo from our medium sized biomass bright loop platforms. Both of these agreements come with 10 year linked terms.
Just on the trend the traction we have received to date has become clear that commercial solutions that address carbon neutral targets have become imperative importantly.
Importantly in parallel we continue progressing in Wyoming, and within recently announced hydrogen hubs, especially in West Virginia.
This includes permitting fuel commitments and collaboration offtake land allocations as well as project funding.
While our recent developments across bright with projects continued to progress. We're also pleased to announce a meaningful update to our board of directors.
Effective today, Dr. Naomi <unk> will join our board of directors, bringing an extensive expertise within the energy sector, particularly in hydrogen generation and carbon capture.
We welcome Naomi to the board and are confident her deep industry experience, who will prove valuable as we continue to accelerate our hydrogen strategy going forward.
To reiterate our updated pipeline when excluding the reclassified operation is over $8 5 billion across all three segments with approximately $1 billion and bright loop opportunities. We believe this puts us on a pathway to reach $1 billion of bookings by 2028 with the combination of small.
Medium and large projects, we feel confident that could lead to $1 billion in revenues from bright loop by 2030, and beyond and with still only represent 1% of the market share of total hydrogen spend by 2030.
I'd now like to focus on the announced strategic business realignment.
Including what it means for the company going forward and its immediate impact to our current operations.
In response to today's market conditions, which include higher interest rate cost and reduced or delayed gross capital expenditures by our customers, we see growth a growing global trend and extending the operational lifespan of existing power and industrial generation facilities.
This presents us with an opportunity to shift our focus to more predictable revenue streams generated from our aftermarket businesses. We plan to utilize these cash flows to strengthen our balance sheet and reduce our overall debt.
While we were also evaluating strategic aftermarket alternatives related to non strategic assets. Further we expect to realize up to $30 million in annualized cost savings primarily through reduction of the high overhead associated with seeking multiple newbuild projects.
Our heightened focus on producing more predictable cash flow generation is consistent with our approach to provide long term profitable growth for the company and its shareholders ultimately driving our decision to streamline our efforts to concentrate on aftermarket businesses and capitalize on higher margin parts and service opportunity.
<unk>.
In order to ensure a successful realignment of our updated strategy. Our focus is on the following.
And a greater emphasis on higher margin aftermarket parts and services across all three segments, while further reducing overhead costs associated with certain large newbuild project opportunities.
<unk>, our senior secured letters of credit facility by up to $20 million by the end of physical fiscal year 2020 for.
Refinancing our existing senior secured credit facility to reduce our interest expense by up to $5 million and.
And just today announcing a commitment for $150 million in refinancing.
Bolstering cash flow generation and strengthening the balance sheet and utilizing federal state and project level financing to accelerate the deployment of our bright looping climate bright technology.
While we recognize the long term growth potential for solar from both the community and utility standpoint, there were several key factors that our management team and board considered when evaluating what steps.
The company would take regarding the pathway for continued growth.
As part of this evaluation process, we have decided to reclassify our solar business out of continuing operations.
This is primarily due to the historical projects the higher risks and the margin profiles.
Looking ahead to next year.
Our focus on promoting future growth aligns with the sustained demand we observe across all segments paving the way for improved performance in 2024, with our announced adjusted EBIT target range of 100 to 110 million when excluding bright loop in climate Bright importantly.
Given our strategic business realignment, we now have increased visibility and confidence in our outlook.
A significant portion of our targeted adjusted EBITDA will be generated from existing backlog with less reliance on large projects.
Now turn the call over to Lou to discuss the financial details of the third quarter flu. Thanks Kenny.
Pleased to review, our third quarter results and our recent commitment for the refinancing of our senior credit facility I'll further details of which can be found in our 10-Q that is on file with the SEC I would also like to call your attention to the fact that I will be.
It's trying to amounts of our continuing operations.
Our third quarter consolidated revenues were $239 4 million, which is a 13% improvement compared to the third quarter of 2022. This.
This was primarily attributable to higher volumes in our renewable segment due to the BMW renewable services operations as well as the thermal segment volume, which increased due to higher levels of construction and <unk> activity.
Our net operating income for the third quarter of 2023 was $5 5 million compared to an operating loss of $2 7 million in the third quarter of 2022.
Our adjusted EBITDA was $20 million as compared to $13 million in the third quarter of 2022.
Bookings in the fourth quarter, 2023, or $198 million and the ending backlog at the at the end of the quarter third quarter on 2023 was $507 million.
Our net loss per share in the third quarter was 18 cents as compared to a loss per share of <unk> 15 cents in the third quarter of 2022.
As Kenny mentioned, we have reclassified the solar business out of continuing operations. As a result, we will have taken an impairment charge of about $56 $6 million and.
Ignite contract losses of 47, 9 million, which include future estimated losses, both of which are reported in discontinued operations.
Pursuing potential recoveries of certain of these amounts up to $40 million and there is no assurance that these amounts will be recover accordingly, such recoveries have not been recognized in the financial statements.
I'll now turn to our third quarter segment results within our Babcock and Wilcox renewable segment revenues were $87 1 million for the third quarter of 2023, which is an 11% increase compared to $78 5 million in the third quarter of 2020 to the.
The increase in revenue is due primarily to higher volume associated with renewable services and our adjusted EBITDA in the third quarter was $10 1 million as compared to $4 5 million in the third quarter of 2022, primarily due to the higher revenue volumes as described above.
Within the Babcock Wilcox environmental segment revenues of $46 4 million in the third quarter of 2023, which is an increase of 4% compared to the $44 6 million in the third quarter of 2022.
The increase was primarily driven by lower volume related to flu glass treatment process projects offset by a higher overall volume of calling technology projects adjusted EBITDA was $5 million for the quarter as compared to $3 1 million for the same period last year and again this is primarily driven by.
A higher product mix higher margin product mix as described above along with favorable closeout of a float glass flue gas fast treatment plant sorry about that hard for me to say flue gas.
Turning to our Babcock <unk> Wilcox thermal second to our thermal segment revenues were $107 million in the third quarter of 2023, which is an increase of 17% compared to the $91 3 million in the third quarter of 2022, and this was primarily attributable to the higher level of volume in our construction progress projects.
As well as parts and service and our package boiler businesses. This was partially offset by a decline in certain service projects.
Adjusted EBITDA in the third quarter of 2023 was $11 3 million compared to $10 8 million in the third quarter of 2022. This was primarily driven by the higher revenue volumes and product mix described above I'll now turn to our balance sheet cash flow and liquidity total debt at September <unk>.
2023 was $377 6 million and the company had cash cash equivalents and restricted cash balance of $65 1 million.
Additionally, subsequent to September 32023, we obtained a commitment to refinance our senior credit facility and amend our existing reimbursement agreement, including updating certain financial covenants there under the.
The refinance commitment is expected to reduce our interest costs by up to $5 million per year based on current interest rates, the financing financing and strategic alignment should significantly improve our liquidity this quarter and onward.
I'm also pleased to announce that we have sought as Kenny mentioned, we signed a letter of intent for the financing of our first bright loop hydrogen project being developed in Massillon, Ohio.
Now I'll turn the call back over to Kenny.
Thanks, Lou closings, while Q3 wasn't without challenges men and included several strategic decisions to improve the fundamentals of our business. We are extremely excited about the growth opportunities ahead of us with increasing commercial interest in our core and new technology and global demand for our base load power <unk>.
<unk>.
Our market outlook remains robust and we see the momentum and booking activity accelerating into 2024 and beyond.
Finally, as always I'd like to recognize the efforts of our employees as they continue to drive our success as an organization worldwide with the outstanding support of our extremely talented and experienced employees and the continued confidence of our customers. We are driving innovation and supporting the global transition to sustainable solutions and we're focused on.
Delivering strong profitable growth for our shareholders.
We are entering a new phase and as we execute our strategic business realignment.
And we look forward to the transformation that will enhance overall margins and improved cash flows generation for the company.
I'll now turn the call back over to Hanna who will assist with any questions Hannah.
Thank you.
If you'd like to ask a question. Please press star followed by one on your telephone keypad.
For any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question.
I will pause here briefly ask questions they registered.
Our first question is from the line of Erin <unk> with Craig Hallum. You May proceed.
Yes, good afternoon, Kenny and Louie thanks for taking the questions.
No problem.
Thanks first for me on the guidance.
<unk> some of the color there can you just talk a little bit more about.
The exclusion of kind of bright loop in climate bright there what those investments might look like as we think about 2024, and then maybe just elaborate a little bit you talked about some some kind of project level financing and other other things that you are pursuing there.
Sure be happy too so I would think about bright looping climate bright from a.
Broader company expense standpoint to be I don't know under $10 million, but 5% to seven perhaps somewhere in that neighborhood just to give some.
Transparency there from a BMW standpoint, obviously the project financing that we're referring to will go in at the project level.
Versus an impact necessarily to BMW. So.
There'll be a timing and depending on how that project financing is set up and the exact structure of ownership of those particular projects, how the revenue will flow back and forth to BMW as we mentioned in the past but.
From an expense perspective rough order of magnitude that's how we're thinking about right with the climate right.
Alright.
Thanks for that and then second just on the backlog.
You talked a little bit, but can you just give a little more color on some of those projects.
It sounds like maybe just slipping into 2024.
Do you have any of those been lost or is it just kind of more of a project timing and then you kind of talked about accelerating momentum just maybe some of the areas that youre looking for as we head into 'twenty one.
Yes.
I would even though we're in November here, we're talking about Q3 on this call I would say some of those are slipping more into Q4, maybe into 2024. It just depends as we worked through those negotiations on a few projects that were trying to complete.
On that is <unk>.
Referenced in my comments.
Some of those delays have referred to increasing some scope and activity potentially for BMW.
As a few of the projects, we're looking to larger upgrades and enhancements in some of our customers are now trying to ascertain how they can extend out the life of these plants longer than maybe they had anticipated so.
It's caused us to cause them to re look at some of the scope in a positive way as it relates to BMW and and so we're excited about that but.
So those negotiations continue but hopefully and we have full intent to get those books still in Q4, but.
One or two of those may slip out into 2024 as well but.
More of a timing I think just from a.
And negotiations aspect and as the customers re look at.
There are approach to some of these technologies and the lifespan of the plants, which in the long run bodes well for us as an aftermarket providers. So.
That's how we look at it I think worldwide obviously.
Some some newbuild opportunities.
In particular, I would say in renewable energy waste to energy some of those are delayed a little bit because of the interest rate increases and timing of capital expenditures.
But not not for any other reason so theres a few that will probably extend into next year overall, but for us.
We talked about on the business is reducing the overhead associated with large newbuild, which this is an opportunity for us to do that we also see potentially increasing opportunities.
Around licensing and licensing some of our waste to energy technologies and in support of some of the new direction that we want to taken the company. So we will balance that as we transition more towards licensing and <unk>.
Less on specific large newbuild opportunities.
Understood.
Thanks for taking the questions I'll turn it over.
Thanks.
Thank you Mr <unk>.
Our next question is from the line of Brent Thielman.
Davidson you May proceed.
Okay. Thanks, good afternoon.
Hey, Ken.
I just wanted to confirm 2024 EBITDA target is 100 to one X.
Alright and climate right.
That's correct Yep.
Yes.
Okay.
And I just again, another clarification, I think <unk> $5 7 million against that potentially in costs.
Gordon.
Right, we've been climate Brian.
Is that the right sort of things.
Fine.
Yes, I think thats lets say below 10, but somewhere in that range. I think is a good number it will tweak and very little bit depending on the project financing and how we.
We deal with that on these projects as they continue to advance and the timing of some of the state funding that we're anticipating as well as other.
SPV level.
Investors that would be investing in those projects. So there's just an element of that timing piece and how the revenue flow between the projects back to BW would take place, which could plus or minus those expenses from a EBITDA standpoint, but.
And it's a little early to predict precisely how that will work and the timing of that but.
We see that pathway unfolding. So just to give you some range that's kind of how we're thinking about it.
Okay.
Okay. That's helpful.
And then I guess.
Particularly in regard to some of these moves to boost cash flow of the business can you talk about what sort of your expectations are.
Kind of into 2024, EBITDA target range should get some benefits from this overall strategic.
Realignment I assume theres less drag from certain operations as a function of this.
How should we think about that 2000 and for EBITDA.
Monday.
The cash flow.
Yes, Brent.
From our standpoint with the emphasis on.
On the thermal business and what we're now what we also call power business, which generate much more cash flow.
That newbuild projects, we should start seeing better conversion that we've had in the past from adjusted EBITDA to the cash some of that cash will be used as Kenny talked about.
Continue to expand our bright loop penetration.
But we should be able to convert a much higher percentage than we confirm it.
And have positive cash flow.
Coming into the second quarter of next year.
Conversion rate would probably be.
I'll be a little bit brought on that because of capex, but the conversion rate would probably be in the 60% range.
With respect to the cash.
Starting to queue.
Right.
Yes, I would say middle of Q2, we'll start seeing that.
Q1, as you know Q1 is always a slow quarter for us as well as others in this industry.
Yes.
Okay, and then I guess just in regard to some of the financing.
You've done here recently, maybe.
Give me your thoughts next steps just related to the capital structure that you may or may not need to take I guess in order to support the ongoing kind of financing commitments, you've got out there to support the growth of the company's support right now.
You feel like the capital structure is in place.
You can do all that at this stage.
Yes, I think the committed financing that we talked about earlier.
100, $150 million for the senior credit facility, which will be both.
That's what I'll call the letters of credit facility and the revolver.
Certainly helps our capital structure.
As does the lower interest rate.
And as Kenny mentioned, we're kind of looking at some some of the strategic arrows that may not fit with our.
In a new direction in.
And that may generate some cash.
Okay.
Okay.
I'll add.
Yes, I'll add to that just real quick, though but that 100 to 110 million EBIT.
EBIT range, it's important to note and tried to emphasize this that we were lessening if you will the reliance on large newbuild projects as it relates to that target.
No.
That doesn't mean that we wont be entering into certain projects. If it makes sense for us to enter into we're trying to obviously allow those to be more upside to that target rather than a necessity in order to achieve the target. So tried to be a little more conservative on that approach with putting that guidance or targets out there.
Okay, great. Thank you Kevin.
Yes.
Thank you Mr Chairman.
Our next question is from Robert Brown with Lake Street Capital markets. You May proceed.
Good afternoon.
I just want to clarify a little bit more on your comments on the realignment and the.
And then sort of pursuing these larger projects.
What kind of I assume it's waste to energy, but our U R.
You then no bidding projects or how do you sort of go to market with that in.
Have you changed your focus there.
Yes, its not as complicated as it sounds.
We're simply twofold and I'll explain that further certain opportunities in certain parts on waste energy, particularly our international.
Opportunities.
Require certain security package levels.
The security packages I E <unk> letters of credit as it relates to us.
Come with high interest rates right. So.
Lot of waste to energy the margins are not as high on Newbuild.
Clearly not as high as our aftermarkets parts services on renewable services, but.
Those those letters of credit and the interest associated with the really compresses margins.
Additional risks so as we look at go going forward two aspects there are opportunities and projects that were in discussions and negotiations on regarding waste energy specifically that.
Would have.
Higher margin potential or targets associated with them that are well above and beyond the interest expense associated with the letters of credits. So those are positive ones are opportunities for us to pursue.
But we want to remove the reliance of that in our forecast so that they're more upside rather than a necessity if that makes sense, but secondarily we.
We do see an expansion opportunity on licensing we had been licensing our waste to energy technology.
In several markets and that typically comes at even higher gross margins and <unk>.
Significantly lower amounts of letters of credit so the interest rate expenses are.
Are the cost of that are much more attractive to us from a margin standpoint. So.
It's not necessarily a no bidder zero bid. It's just as we continue to focus will reduce the overhead down to match, what we think is.
The handle one or two or three or whatever the projects that we think that our.
A stronger opportunity for us from a margin and cash flow standpoint, as we also increase the licensing model that we have.
Clearly around our waste to energy technologies. So I don't know if that makes sense, but it's as simple as that sounds.
Okay.
Okay. Okay got it thank you.
The bright loop pipeline.
You've given some pretty good color on it over in your last analyst update but.
How is that pipeline kind of at this point are you seeing more projects come into it.
Seeing the direction in terms of project certainty and some of those.
They were waiting for some of the government supports and financing incentive.
Yeah. So so we are excited about the opportunities in the pipeline building, we when we announced the pipeline we typically keep it to a three year.
Projects that we think we will book in the next three years. So I guess, if we expanded our pipeline to total opportunities you would you would see.
Several more billions and those opportunities and thats, mainly around bright loop as it relates to those large projects. So.
Our overall opportunities on bright loop keep growing around that we have.
As a result of that we keep expanding that organization.
Going forward and bright looping climate bright.
We haven't got through a final decision on this yet, but we were debating and discussing whether or not we should move bright lupin climate, Brian may be true.
A separate.
At least discussion and not necessarily segment going into next year, but we're not at that point yet.
But the the short term aspect the opportunity as Lou mentioned, Ohio now is moving into a real.
Project for us the financing is coming into place the off take agreements are moving into definitive agreements for up to 10 years take or pay on that hydrogen obviously, it's not a big plant relatively speaking, but it's important because it puts in the ground commercial technology for us and moves it.
From where we were before.
The state discussions that we're having with several states now continue those applications are moving into a real status. Some of those will start to move into public domain soon and you will see further announcements on that.
It might be a phased in approach on some of that funding coming from states.
And we're.
We continue the discussions on the federal level as well too.
The other aspect again, it's kind of a circular piece, but the hydrogen hubs that were just recently announced.
By the Doe.
In particular, the appellation hub.
They're just mentioned and we've mentioned before previously some of the work that's taking place there and mountaineer in West Virginia, That's all pull through that will eventually some of that will get down to us that's going to take time obviously.
But those things keep moving on we've increased.
<unk> now.
Boy I'm going to throw out a number its probably were up to about 30 different fuel testing our samples that we're testing across a broad range both in.
And utilizing solid fuels such as certain coal developments also in <unk>.
Biomass developments.
And multiple locations thats going through our labs at this point in time, so we keep increasing the amount of fuel testing related to the opportunities.
And we keep developing the opportunities as we keep unfolding the projects that are before us but.
As mentioned on.
And our comments today.
The developments around air products and getting to a 10 year agreement with moving forward with them.
Finally, as a 10 year agreement that.
That location is a big step that plus the general hydrogen announcement puts us in an uptake of up to 220 tons. A day. We are in negotiations on the feedstock aspect, mainly biomass in that particular location and we're in negotiations on the lease and then the air permitting process there.
We are also in discussions on funding around that project. So all all corners of that pyramid are coming together.
The same in some of the other locations and we'll keep announcing that obviously as we continue to make progress there, but but Brian keeps expanding and we're excited about those opportunities one of the areas.
I didn't talk about in our comments, but I'll say it on the call here that we're starting to see more early on this so we'll identified as we move along but what we're starting to see globally.
And potentially in the U S is actually combining.
Ammonia, either net negative or net neutral ammonia with coal fired plants to reduce the overall seo to offset of those coal fired plants.
We see a wide that activity happening a lot, especially in Asia. There has been some discussions with a few here in the U S. So really early on that application, but that's exciting for us because.
As I mentioned before a lot of these plants now are looking to extend their lifecycle and power generation and if we can introduce a net neutral or net negative ammonia production from biomass, which bright loop can do these power plants can actually have a carbon offset that would take.
Literally depending on the mix could take a coal plant down to net at least net neutral by by 2030.
That's an exciting development, we're early in that discussion, but it bodes well for us because it's both aftermarket parts and services for our Baseload power generation of thermal group, but it also opens up offtake for ammonia produced by net negative.
Carbon intensity bright loop using biomass. So we're excited about both ends of that spectrum and that's one of the decision points that went into our thinking that get more around our thermal parts and services and our renewable parts and services.
And focus more on the bright with climate bright because it's becoming more real for us at the same time reduce.
Some of the costs associated with some of the other areas. So all of that adds into that realignment strategy.
Okay, great. Thank you for all the color I'll turn it over.
Thank you Mr. Wang.
Question is from the line of.
Alex Rygiel with B Riley.
Christine.
Thanks, Good evening, kidney and lose a lot going on here.
So let's.
Get into a couple of things first as it relates to the $30 million in annual cost savings can.
Can you comment on the timing of that and how important is that and getting to your guidance of 80.
100 to 110 million next year.
Yes.
Some of that has already started.
That will help out a little bit in Q4, and clearly we'll kick in heavily in to Q1.
On that.
Yes.
That process has already begun obviously, we're taking steps some of the timing of that may be more in Q1 than now, but they've been identified in.
Those are in process to be implemented I guess best way to describe it.
Yes.
Excellent and then there was a reference to strategic alternatives related to non strategic assets is there any chance you could quantify kind of the possible value here.
Realized.
In making those I know great question, Alex I wish I could but ill leave that out for the moment, but just wanted to say we look at various things from asset some of those or it could be property locations and other things assets that no longer strategically that we need going forward, but.
Don't have a valuation or anything that we would want to put out.
At this point in time.
Great. Thank you very much.
Thanks, everyone.
Yeah.
That concludes our question and answer session I would now like to turn the call over to Sharon for any closing remarks.
Thank you for joining US today. This concludes our conference call a replay will be available for a limited time on our website later today.
That concludes today's call. Thank you for your participation you may now disconnect your lines.
On our website later today.