Q3 2023 Natural Gas Services Group Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the natural gas services group incorporated quarter. Three 2023 earnings call. At this time all participants are in listen only mode. Operator assistance is available at any time during this conference by pressing the zero Pal.
I would now like to turn the call over to MS. Anabelle got leased again.
Thank you Liz and good morning, everyone before we begin I remind you that during this call. We will make forward looking statements within the meaning of section 21 E of the security and Exchange Act of 1934 based on our current beliefs and expectations as well as assumptions made.
The information currently available to natural gas services group leadership team.
Although we believe that the it which is reflected in such forward looking statements.
She'd give no assurance that such expectations will prove to be correct.
Please refer to our latest filings with the United States Securities and Exchange Commission or the factors that may cause actual results to differ materially from both in the forward looking statements made during this call.
In addition, our discussion today will reference certain non-GAAP financial measures, including EBITDA.
Adjusted EBITDA and adjusted gross margin among others.
For reconciliations of these non-GAAP financial measures to our GAAP financial results.
Please see yesterday's press release, and our form 8-K, 10-K, and 10-Q furnished to the SEC.
I will now turn the call over to Steve Taylor, our chairman and interim CEO.
Yeah.
Thanks Anna.
Thank you Luke and good morning, everyone.
Welcome to our second Corp, third quarter 2020 earnings Conference call.
Thank you for joining us this morning.
Before taking your questions I'll highlight our financial and operational results for the third quarter.
Discuss the current business environment and provide comments on other aspects of our business.
We had a very successful third quarter sequentially. Our total revenue increased over 16% with a year over year increase of 42%.
These increases were led by rental revenues that grew by $36 million or 15% sequentially and.
$9 $1 million or 49% when compared to last year's third quarter.
Sales in the Ams revenue combined being about 12% of total revenue.
Grew by approximately $800000 or 28%.
Sequentially total gross margins grew by 14% <unk>.
SG&A declined by over $2 million or 41%.
And adjusted operating income was up almost seven times to $4 9 million.
Sequentially net income increased by over four times, and EBITDA grew 19% to $11 $8 million.
In the comparative year over year periods, we saw similar growth dynamics and cost savings.
Details later on the call.
Our 2020 through capital program is proceeding as planned.
And as we have also experienced in the last quarter.
To show exceptional and positive financial impacts.
Additionally, we saw the following of our 8-K. This morning, we have expanded our existing credit facility from $175 million to $225 million.
As a new member bank to the group.
These funds will continue.
Be primarily dedicated to our 2020 for growth capital plans.
Represent continuing confidence from our banks as the results were achieving.
Planning going forward.
On this call I have Jim Hays are joining me Jim is our Vice President go services and has been within Ges almost 20 years.
Brian Tucker is also here and joined in just about a month ago as president and COO.
At the same time, John Bittner took over our Chief financial officer duties on an interim basis.
Brian and John both have extensive experience in their respective fields and if you'd like a refresher on the backgrounds now refer you to the press release, we published at the time.
We're glad to have all of them on our team.
Now, let me jump into review of the third quarter.
Total revenue for the three months ended September 32023 increased to $31 4 million from $27 million for three months ended June 32023, or 16, 4% increase in sequential quarters.
Total revenues increased year over year from $22 million for three months ended September 32020.
Two.
We're a 42, 3% increase.
Sequentially adjusted total gross margins increased 14% from $12 $8 million last quarter.
On a year over year basis, our adjusted total gross margin of $14 $6 million in the third quarter of 2023.
Increased approximately 49% when compared to $9 $8 million in the same period in 2022.
Rental revenue increased 15% from $24 $1 million and three months ended.
June 32023, compared to $27 7 million three months ending September 32023.
Rail revenue increased to $27 $7 million in the third quarter 2023 from $18 $6 million.
Third quarter 2022.
For a 48, 7% gain over the past year.
Both comparative period increases were primarily the result of the increased deployment of higher horsepower rental units slightly higher horsepower utilization across the fleet.
In a rail price increases throughout the year.
Rental revenues now composed of approximately 85% to 88% of our total revenues in all comparative periods.
Adjusted gross margin increased sequentially from $12 $8 million or 53% of revenue.
In Q2, 2023 to $14 $2 million or 81% of revenue and third.
<unk> third quarter 2023.
This was a 12% increase in gross.
<unk> margin dollars since last quarter.
Our gross margin percentage has slipped to 150 basis points due to higher than usual parts costs.
We see that as an irregularity and anticipate that these margins will recover in the fourth quarter.
The comparative year to date nine month periods, our rental revenues have increased 38%, while adjusted gross margins grew by 50%.
As of September 32023, we had 233 utilized rental units representing over 400000 horsepower.
Compared to 11, 196, 400 units, representing just over 305000 horsepower.
September 30 of 2022.
We have added over 85000 horsepower to the fleet this year and approximately 20% increase in total fleet horsepower.
Our total fleet size just passed 500000 horsepower in September for.
For a total of 509500 9000 horsepower.
At the end of the quarter.
During that same period, our rent horsepower grew by almost 95000 horsepower.
That's a 31% growth in utilized horsepower equates to incremental utilization of 111%.
That's a utilization number you won't see often.
We ended the third quarter was 63, 3% utilization on a per unit basis.
78, 7% utilization on a horsepower basis.
Utilization decreased slightly from 65, 4%, primarily due to lower utilization of our small to medium horsepower fleet and the impact from lower natural gas prices.
The horsepower utilization experienced a slight uptick from 78, 6% in the second quarter of the year.
Revenue per horsepower per month increased 13, 5% over the last 12 months demonstrating the impact of the growth in higher horsepower units and the price increases we have been able to implement over the last year.
Our total fleet as of September 32023, consistent at 19, 147 units and 509000 horsepower or 262 horsepower per unit are.
Our average horsepower per unit has grown by 22% over last year.
Notably approximately 97% of our high horsepower fleet is utilized in drawing brand.
Presently our large horsepower assets comprised approximately 19% of our current utilized fleet by unit count.
And over half of our utilized horsepower and current rental revenue stream.
Sales revenue so the sequential quarter decrease of $1 6 million in Q2 23 to.
To $1 4 million in the third quarter this year.
This decrease was from quarterly fluctuations, we typically experience in compressor and part sales.
On a year over year quarterly basis sales revenues decreased from $3 $1 million to $1 4 million.
This was driven by the one time large sale of active rental equipment to an existing customer in last year's third quarter.
As I've mentioned in the past our sales activity.
Primarily representing compressor flare parts in this land sales had declined over the past few years due to higher customer demand for rental services.
Our increased outsourcing of large horsepower fabrication and our de emphasis of flare sales and service.
This lower level of sales to continue due to the changes mentioned.
We'll continue to be volatility, albeit reduced.
Ams, our after market services and our most recent two quarters have seen large increases in revenues.
This is primarily due to pass through services that we provide to or a range for customers cornerstone in our large horsepower units.
These revenues will fluctuate with the volume of equipment set in each quarter.
And they carry low pass through margins.
However, when sales May Ams revenues are combined they represent 12% of our total third quarter revenues.
We experienced 28% growth in sequential revenues.
Positive gross margin of eight 5%.
Year over year, the combined revenues increased $250000 gross margins decrease was still held at 9% of revenue.
Our SG&A expenses decreased a bit over $2 million sequential quarter and totaled 9% of revenue.
On a year over year basis, SG&A expenses decreased over $1 $2 million.
This wasn't anticipated and welcomed decline in expenses and a 9% of revenue, which is uncharacteristically low we think this represents the low point.
Going forward, we anticipate that SG&A will normalize at a level, 15% to 20% higher than this quarter still a reasonable amount.
Sequentially, we reported increased operating income of $4 $9 million in the third quarter 2023.
Compared to $712000 in the second quarter this year, almost seven times higher.
This improvement was primarily due to higher rental revenues along with a decrease in SG&A.
On a year over year basis, our operating income increased to $4 9 million compared to an almost $300000 loss in the same third quarter period in 2022.
Our net income in the third quarter of this year was $2 $2 million, our 18th per basic and diluted share.
This compares to net income of $504000 second quarter of the year or <unk> <unk> per basic and diluted share.
In the year ago year ago quarter, our net loss was $80000 or one sir.
Adjusted EBITDA increased 19% to $11 $8 million from the second quarter.
$9 9 million and increased 53% from $7 7 million for the same period last year.
From a balance sheet perspective, our cash balance as of September 32023 was approximately $200000.
In the first nine months of this year, we have generated.
$25 $7 million in operating cash flow, which is 27% higher than the $22 million generated in last year's comparative period.
At the end of this quarter, we spent $128 6 million for capital expenditures.
98% of this or $126 4 million.
Was expended on rental fleet growth.
I'll now ask John to comment on the bank facility John.
Thank you, Steve and good morning, everyone.
The outstanding balance on our current revolving credit facility as of the end of Q3 was $128 million.
Looking at our Chief financial covenants, the leverage ratio at the end of Q3 was $2 701, and our fixed charge coverage ratio for Q3 was $2 78.
Both giving us comfortable cushion of these ratios as compared to the required levels in our credit agreement.
And the company is in compliance with all terms conditions and covenants in the credit agreement.
As Steve mentioned earlier and as you may have seen in our announcement. This morning, we have secured an increase in the total commitment of our credit line of $50 million from our bank syndicate.
The access this additional commitment using the accordion feature contained in our existing credit facility.
The total commitment.
<unk> was the only change to the credit facility with all terms remaining the same particular, our borrowing rate, which currently is sofa plus a spread based upon our net leverage ratio, which at the end of Q3 the spread.
Interest rate was so far plus three 5%.
We continue to have units being delivered through the first half of 2024. So we will look to utilize the additional capital for our capital requirements beginning in the second half of 2024.
With that I'll turn it back over to Steve for some closing comments.
Okay. Thanks, John.
This past year.
Essentially since we've incurred our debt balances have had requests from shareholders to provide a greater level of detail as to our forward plans.
Otherwise known as your guidance.
As you know guidance is always a risky area and I equate it to what can happen in a football game with a forward pass there are three possibilities.
Passengers completed if not completed or its intercepted therefore.
Therefore, you have a one in three chance of being successful.
Guidance, whether it be high low or right on the number again one in three.
In spite of that I think it's a fair request that said we are issuing our first set of guidance for revenue and EBITDA for 2023 and 2024.
These numbers along with the quote unquote color provided in my prior comments should allow everyone to assemble their own models with a higher degree of accuracy.
For 2023, we anticipate the full year revenues will end up between $110 million and $116 million and EBITDA will range between $37 million and $39 million.
In 2024 revenues projected to be $130 million to $140 million with.
With EBITDA between $50 million and $60 million.
Note that the 2024 guidance does not reflect any impact of a 2020 for Capex program.
But we will update that as soon as we announced details next year's capital program.
So we've not only dipped our toe into the water, we're now up to our neck.
Ask behind.
From a macro perspective, the factors supporting hydrocarbon production and pricing appears to be intact.
There are certainly countervailing wins, notably the recent weakness in crude price, but overall, the hydrocarbon economic environment seems to be favorable.
We've avoided the once predicted 2020 through recession Opex seems right to defend any further weakness in construction of appreciable LNG export facilities in the Gulf continues it's.
Its never smooth sailing, but we think 2024 and into 2025, we will continue to be a good environment for Ngls.
We are in an under supplied gas compression market. It appears that it will continue into next year.
Industry utilization continues to be a very high levels.
And listening to others earnings calls theirs.
Little if any incremental capital being plant mitigate the darth of gas compression equipment.
Lead times from major components continue to stretch out.
As India goes forward, we will endeavor to pre contract equipment with long terms of required returns before we commit to building it.
As we've done in the past this will ensure our committed capital returns.
We intend to pick our customers this isn't meant to be a leaf statement.
But <unk> has a lot to offer from our service capabilities to superior equipment and run time to technology.
Capital is limited and we want to make sure the customer is going forward with us appreciate the value we deliver and are looking for strong partners as we are.
We're both foundry industry and our opportunities with our capital availability long term contracts at exceptional rates and good Counterparties. We're in an enviable position to take advantage of the strong environment.
Thanks for your time I look forward to your questions.
Ladies and gentlemen at this time, we will conduct a question and answer session.
We would like to state a question. Please press seven pound on your phone now and you will be placed in the queue in the order I see you.
You can pass seven pound again to remove yourself from the queue.
Now we're ready to begin.
Our first question comes from Tate Sullivan with Maxim Group go ahead. Please.
Hey, Steve.
Great.
Hi, first time in history with the forward guidance.
Does that is that something that made the banks more comfortable or.
Can you talk about your discussions with them and how they get comfortable with their growth plans.
No I mean, it didn't come from the banks truly I mean, the bank, obviously has a confidential forward projections and things like that so they have.
Plenty of information to make their decisions on that.
Mentioned is primarily.
Shareholders that.
Wanted Additionally, information then.
With the <unk>.
Dead load, we've taken on which we have not ever had this level of debt before I felt like it was a.
Fair request. It took me a couple of quarters to come around to it but.
No we just.
I wanted to go ahead and try to give.
A better picture of the future.
And what we can.
We plan on doing with the money and the results we see.
And then can you can you repeat one of your colleagues.
The leverage ratio ended the quarter and then.
Could you sort of somewhat implied.
On what you were already constructing maybe a pause in capex in the first half of 'twenty or did I misinterpret that.
The.
The leverage ratio I think it was two seven something maybe 73 to $2 seven in that.
That area.
And I'm not sure I understood on the first quarter 'twenty for what we.
What we've got is some of the.
Capital from the 23, three plan will roll over into the first part 24 necessarily just from the point of.
Equipment being finished the capital being committed say in Q4, but with lead times and build times and everything else, we won't give some of that equipment until Q1 and a bit of it into Q2. So.
We're using so that's essentially some of the capital from 'twenty three falling over into 'twenty four from the point of.
Being spent but being built and delivered a two different timelines. So I think thats, what I think that's what you're referring to.
Yes.
And then just a quick last one for me is the accounting question.
Capitalized and the practices of capitalizing the interest expenses, but then you have interest expense on the income statement. This quarter are you changing the practice in terms of capitalized interest.
No the practice stays the same but there.
There is some variability in how much you capitalize it.
Not all.
Capitalized so there is some.
Ill.
I'll refer you to.
No.
Accounting Department on this at all.
Particular details, but there is a variability in how much you can and cannot capitalize by quarter.
Okay.
Okay. Thank you very much.
Okay. Thanks.
Thank you very much Mr. Sullivan. Our next question comes from Mr. Rob Brown with Lake Street capital markets.
Please.
Hi, Steve.
Hey, Rob.
Hi.
First question just on the capital spending took this on what Capex. You spent you plan to spend this year and then.
No you didn't say 24, and I think your guidance did not include the capital spending.
In 'twenty four but how does how does 'twenty four capex.
Yes, the capital were announced capital budget this year was $150 million.
And that will all be spent as I mentioned, it's all committed.
From 2024, we haven't announced that yet.
Obviously, we wanted to get.
Some capital commitments in place before we started.
Going too far field on that and that we've got that.
We want to confirm.
Customer desires and stuff so that will take us.
We thank you all and thank you Sir.
Within the next 30 days to.
You see where we are from that standpoint, and what customers want what.
And as I mentioned were.
We're high grading and prioritizing the customers.
We want to.
Yes, Bill foreign workforce so.
When we have.
A more definitive number.
We'll announce that obviously.
Additional $50 million in capital.
Billable.
Weather.
All of that is committed pretty quick or we spread it out or or we end up getting more is still a question up in the air but.
We'll announce a little more detail on that we just got the capital.
<unk> obviously.
Yesterday announced today, so we're going to start working on placing it now.
Okay, Okay, Great and then and then I think youre alluding to a little bit, but the demand environment sounds strong.
What are you sort of hearing kind of from customers at this point it sounds like you're you've got more demand than you can fulfill but since of the demand environment and the.
And the visibility into 'twenty four.
Well I mean demand continues strong and it's not just us I mean the whole.
The whole gas compression rental industry is doing pretty well.
Uh huh.
Calls of other public companies in the gas compression space hotel that so the market continues strong.
Some people even talking into 2025, and Thats, primarily just because equipment deliveries of have stretch yes. They were.
The six to nine to nine to 12, and now generally youre, probably talking 12 plus months.
You have to get equipment so.
Necessarily youre talking into the end of next year on.
Into 2025.
So we see it as strong we think it will.
There will be a good year also and I want to point out.
The $50 million increase in our core DNA.
Could you mean.
Money, but it pales a little when you had $175 million already drawn committed debt.
With the deliveries were essentially talking about a second half of 'twenty four.
If you order equipment today, it's about when are you going to get it so.
Right now our.
View of the capital budget for 2000 and towards the second half, where we do as we just talked about with the <unk>.
We've got equipment coming out in Q1 Q2 <unk>.
Continue to be placed and generate rentals. So we're talking to customers yesterday about.
The second half of the year, So we're pretty we're pretty close to that.
Beginning of 2025 also so we think.
The demand is there.
<unk> been talking to our customers in and they say it is so.
As soon as we have more definitive.
Maybe just for you all.
The capital program 24 wall, we'll put it out but yes, we're pretty confident of.
Demand.
Okay, great and just to clarify on guidance.
My question is on guidance after just giving it but but does that guidance include.
I think you said it did not include sort of the 24 capital plan in those numbers that would be sort of on the current capital plan and that much incremental capital is that right.
Yes, yes, the numbers for 24 are pretty much.
Pretty close to a static model.
And again, just like I had mentioned.
Even ordering stuff today.
In November I mean, we're more into Q4, so yes.
Once we.
Get the customer.
<unk> and do all the stuff you're into the end of the year, maybe a little into.
Sooner in Q4, just depend on what we can do in the sizes were buying but.
That number does not include any incremental capital into it other than what's bleeding over from.
23.
So.
And you can tell from the guidance is still going be a pretty strong year even without.
Incremental capital in there.
Okay great.
Great and then last question on margins you had a little.
Margin compression this quarter, you said should return but.
Was that any one time stuff or just sort of natural in and out of the business.
No nothing nothing in particular just.
It just had some higher expenses.
In the quarter.
Sometimes you'll get that sometimes you get low expenses, sometimes you get high they all there's no rhyme or reason to it sometimes so nothing extraordinary but we do think.
We will see a.
Back on.
The trend we want with you all.
The one statement that caf.
Too far but probably two.
Two or 300 basis point improvement in margins I think in Q4.
If you're Lucky you already got me, giving more guidance what cohort.
Alright, Thank you I'll turn it over.
Okay. Thanks, Rob.
Thank you very much Mr. Brown.
Again, if you have any questions. Please feel free to.
Seven pounds. So you can ask your question again that seven pound on your phone.
We have Mr. Tim O'toole.
Next on with Tetra capital go ahead. Please.
Good morning, Steve how are you.
Tim Good U.
Im well.
Hi.
Kind of trying to decide what to use this morning, but.
It seems like you've accomplished an awful lot of your retirement, maybe as much and submit in the prior 10 years running the company.
Congratulations.
Well I don't know if thats, a complement or not is it well I know it sounds a little left handed alright immediate as the combo alright.
Alright back added one, but I'll I'll take it.
Alright, yes, little Athena sorry about that.
I'm trying to so a couple of things that I'm kind of curious about I'm not sure. If you can slice and dice it this way but.
If you look at your what you consider large horsepower fleet.
I'm trying to get some sense of what the age of that part of the fleet.
Because I think the the kind of the book value the depreciated value, let's say a stuff that older than that is smaller than that is probably.
Close to nothing it's probably not quite yet.
But it also seems to me that you have been.
$200 million.
Cash flow over.
Let's say the years prior to.
'twenty three.
And then you spent another $150 million so.
On large horsepower very much in demand.
Equipment.
So it would seem to me that you are.
Your fleet age for the for the larger horsepower stuff is so much demand would be relatively young do you have an estimate of that even if its a rough thumbnail.
Yeah.
Yes, I mean, it is pretty young and yet I remember.
Okay.
To coin a phrase for users and a little bit.
Or I guess, it's beauty, but.
Jan this bigger horsepower.
Specialty you will particularly the <unk> hundred horse in 'twenty 500 horse.
We got 25 year book lives on those so that's those are bigger.
Heavier longer lived equipment. So when you look at.
You can look at just a.
Find out years, you can look at relative to the age but either one we've got a pretty young because for our fleet I would I would dare say.
Sure.
The youngest if not one of the youngest and I know, we've got a relatively smaller fleet than the bigger competitors, but.
We start moving into the 500, 2500 horse, which is becoming.
Kind of the bulk of our large horsepower fleet.
Four five years ago. So at the outside we've got we've used at 20% of life on the oldest.
Big horsepower units.
So that's pretty small so you know that's one of the advantages of.
The horsepower market, just having such a long a lot of equipment.
You can get multiple payouts I'll it over.
<unk> lives. So we have a relatively.
Yung.
Fleet in that.
A horsepower range.
Okay, great. Thank you.
So yes.
I'm trying to.
It's a little difficult comparing with the tiers because you have.
Smaller.
Smaller kind of old fleet, but then you actually have a very fresh and youre able to put capital to work in the in this.
And the younger a big bigger horsepower equipment.
So I did a little a.
A little math on just what you actually have rented what youre I don't want it. So another question is what does the new horsepower of equipment.
What does it cost per horsepower, that's been going up over the last couple three years pretty significantly.
Wondering if you could update me on that.
Yes, it has gone up quite a bit.
Yeah, we were looking back at some poor five year old prices and kind of.
Kind of scares and makes you long for the old times right.
Yeah.
Generally today.
You probably see.
And I'm talking about.
Primarily 500, 2500 horse, but you'll get some of the you know the the small horsepower in this range you're into the <unk>.
Roughly 11 hunter to $1200 per horsepower.
Okay, Yes, I was using sort of a $11 50, and I think that was.
Guesstimates earlier Congress.
Okay great.
Yes. So so this is.
Did a little bit of.
Calculated calisthenics, if you will.
And you have 400000.
Horsepower rented right now is obviously bigger than that but you had some of that older stuff that is still underutilized.
When the gas markets come back perhaps a lot of that stuff goes to work are you are you can kind of.
Trimmed the.
The fleet out a little bit but.
But if I put an 11, a replacement value, which is obviously not.
Strictly speaking correct, but if I put a replacement value on.
On the 400000 that you're renting right now at what current prices per horsepower would be.
And they take the debt out I come up with a number that is something on the order of $26 a share.
Is that M I.
Is that draw.
Dreaming way too heavily or is that is that.
Starting to get to how are we starting to get close to reality with that kind of the numbers.
Well, we've got a tangible book of around <unk>.
1919 five.
Sure.
So.
That delta between your number and tangible book is six or $7.
So.
About 25% to 30% roughly something like that I don't know, it's hard to it's hard to say.
Yeah, because you got.
The smaller equipment youre down into the 60, 70 horsepower rotary screws and low prices low volume stuff that doesn't carry as much value on it up into 'twenty.
2500 horsepower four stage gas lift equipment, which is premium equipment right and it's got R. R.
Our technology and emissions technology in.
Operating technology and stuff like that so you've got a pretty wide range.
The 1100 12 hard is what is current on the big horsepower.
You probably cant.
Put that on the smaller horsepower we've got.
No I don't know exactly what the right number would be on average and we'd have to look at that time.
To me it 25% difference in your number in our number probably isn't.
As part of the judgment right I mean, it's not.
Everybody's going to have a different different view of value. So.
It didn't.
I wouldn't.
Are you use too much down I would say it's.
You may be a little high but.
19, perhaps as real numbers. So that's when you got a gauge from.
Well, yes, but that is also a historic number based on a whole lot of the equipment.
The purchased many years ago.
Brian.
900 or less per horsepower.
So that's what I'm trying to go a little bit if someone wanted to replace your fleet not to mentioned kind of your.
Your backlog your your customer base.
You are.
Your support.
Youre seeing support equipment.
Personnel.
They have to pay something like my number to get there and get an active rental fleet.
Anyway, it's really just again calculator calisthenics and I appreciate you walking me through that.
No problem.
That is it for me for the time being let's see if there is someone else ask some questions. Thanks, Okay. Thanks, Tim.
And good to talk to you by the way.
Thank you very much.
Last question is from Mr. Tate Sullivan with Maxim Group.
Go ahead please.
Thank you, Steve just a quick follow up.
23 implies a slight quarter over quarter decrease in revenue and EBITDA is that mainly maybe could service and maintenance.
Less service and maintenance revenue in <unk> or any other dynamics going on in the current quarter.
Quarter over quarter decline.
Yes, there's probably.
I imagine.
The service and Ams favorite because those jumped quite a bit a couple.
Got a couple of million, but $1 million or so on one of them things like that so there's going to be we've set a lot of equipment in that that number tends to be a little higher so.
You know it.
Any any.
Lower impact would be.
That range is like you say.
Okay.
And that.
That is that largely.
Larger numbers mainly.
Related to when you deploy the larger compressors in the field to confirm is that correct.
Yes exactly.
Yes.
So a lot of pass through she got low margin because young passengers typically are lower margins. So it's a lot there's there's some.
<unk> costs in there to freight the equipment out there is installation cost set up costs and stuff like that so a lot of times, we'll do that for the operator.
If they don't have the desire or the experience to do and we will just pass it through to them.
Okay.
Thank you.
Okay. Thanks, David.
Thank you very much and we don't have any other questions.
Okay. Thank you Luke thanks for everybody's questions.
We appreciate everybody's support I certainly want to.
Thank all of our employees. They obviously are the ones that.
Did the real lift and work on these numbers when we get to we get to brag about them. So I want to thank all of our.
Employees and Supervisors, we got in the field of doing the hard work.
Thank you everybody for participating in our call and we look forward to updating you on our progress in the next quarter. Thank you.
Thank you everyone and this concludes today's conference call. Thank you for your attention.