Q2 2024 NACCO Industries Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the NACCO Industries second quarter 2024 earnings conference call. At this time, all lines are in the listen-only mode. Following the presentation, we'll conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 1st, 2024. I would now like to turn the conference over to Christina Kmetko. Please go ahead.

Operator: Good morning, ladies and gentlemen, and welcome to the NACCO Industries 2nd quarter 2024 earnings conference call. At this time, all lines are in the listen-only mode. Following the presentation, we'll conduct a question-and-answer session. If at any time you discuss, you require immediate assistance, please press star zero for the operator.

Speaker Change: Good morning ladies and gentlemen and welcome to the NACO Industries second quarter 2024 earnings conference call. At this time, all lines are in the listen-only mode.

Speaker Change: Following the presentation, we'll conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Operator: This call is being recorded on Thursday, August 1, 2024.

Speaker Change: This call is being recorded on Thursday, August 1st, 2024. I would now like to turn the conference over to Kristina Kmetko. Please go ahead.

Christina Kmetko: I will not like to turn the conference over to you, Christina Kmetko. Please go ahead.

Christina Kmetko: Thank you. Good morning everyone, and welcome to our second quarter 2024 earnings call. Thank you for joining us this morning. My name is Christina Kmetko, and I'm responsible for investor relations at NACCO. Joining me today are JC Butler, President and Chief Executive Officer, and Elizabeth Loveman, Senior Vice President and Controller. Yesterday, we published our 2024 second quarter results and filed our 10-Q. This information is available on our website. Today's call is also being webcast.

Christina Kmetko: Thank you. Good morning, everyone, and welcome to our 2nd quarter 2024 earnings call. Thank you for joining us this morning.

Kristina Kmetko: Thank you. Good morning, everyone, and welcome to our second quarter 2024 earnings call.

Christina Kmetko: I'm Christina Kmetko, and I'm responsible for investor relations at NACCO. Joining me today are JC Butler, President and Chief Executive Officer, and Elizabeth Loveman, Senior Vice President and Controller. Yesterday, we published our 2024 2nd quarter results and followed our 10-Q. This information is available on our website. Today's call is also being webcast. The webcast will be on our website later this morning and available for approximately 12 months.

Speaker Change: Thank you for joining us this morning.

Christina Kmetko: I'm Christina Kmetko and I'm responsible for Investor Relations at NACCO. Joining me today are J.C. Butler, President and Chief Executive Officer, and Elizabeth Loveman, Senior Vice President and Controller.

Speaker Change: Yesterday, we published our 2024 second quarter results and filed our 10-Q. This information is available on our website. Today's call is also being webcast. The webcast will be on our website later this morning and available for approximately 12 months.

Christina Kmetko: The webcast will be on our website later this morning and available for approximately 12 months. Our remarks that follow, including answers to your questions, contain forward-looking statements. Reconciliations for these non-GAAP measures can be found in our earnings release and on our website. With the formalities out of the way, I'll turn the call over to J.C. for some opening remarks.

Christina Kmetko: Our remarks that follow, including answers to your questions, contain forward-looking statements. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. These risks include, among others, matters that we've described in our earnings release, 10-Q and other SEC filings. We may not update these forward-looking statements into our next quarterly earnings conference call.

Speaker Change: Our remarks that follow, including answers to your questions, contain forward-looking statements.

Speaker Change: These statements are subject to several risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. These risks include, among others, matters that we've described in our earnings release, 10-Q, and other SEC filing.

Speaker Change: We may not update these forward-looking statements until our next quarterly earnings conference call. We'll also be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance.

Christina Kmetko: We'll also be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliation for these non-GAAP measures can be found in our earnings release and on our website.

Speaker Change: Reconciliations for these non-GAAP measures can be found in our earnings release and on our website. With the formalities out of the way, I'll turn the call over to JC for some opening remarks.

JC Butler: With the formalities out of the way, I'll turn the call over to JC for some opening remarks.

JC Butler: Thank you, Christine.

John C. Butler: Thank you, Christine. Good morning, everyone. We're halfway through the year, and I'm pleased to be talking about another strong quarter. Our 2024 second quarter operating profit increased substantially from a year ago. Looking at the reported numbers, it's up 321%. I need to point out that within those results is a $4.5 million gain on the sale of a legacy land asset. Excluding the gain, our operating profit still increased over 60% from last year's second quarter.

JC Butler: Good morning, everyone. We're halfway through the year, and I'm pleased to be talking about another strong quarter. Our 2024 2nd quarter operating profit increased substantially from a year ago, looking at the reported numbers. It's up 321%. I need to point out that within those results is a $4.5 million gain on sale of a legacy land asset. Excluding the gain, our operating profit still increased over 60% in last year's 2nd quarter. This increase was driven by a significant improvement in results in our coal mining and North American mining segments.

J.C.: Thank you, Christine. Good morning, everyone. We're halfway through the year, and I'm pleased to be talking about another strong quarter.

JC: Our 2024 second quarter operating profit increased substantially from a year ago. Looking at the reported numbers, it's up 321%.

Speaker Change: I need to point out that within those results is a $4.5 million gain on sale of a legacy land asset.

JC: Excluding the gain, our operating profit still increased over 60% from last year's second quarter. This increase was driven by a significant improvement in results in our coal mining and North American mining segments.

John C. Butler: This increase was driven by a significant improvement in results in our coal mining and North American mining segments. Christie will go into more detail about our second quarter earnings and provide an overview of our outlook in a minute, but first, let me give you an update on our operations. I'm pleased to report that customer repairs to the damaged boiler at the Red Hills Power Plant are progressing, and we believe the boiler issue should be resolved and the plant fully operational by the fourth quarter.

JC Butler: Christine will go into more detail about our 2nd quarter earnings and provide an overview of our outlook in a minute. But first, let me give you an update on our operations. I'll start with our coal mining segment, which saw the biggest year-over-year improvement. I'm pleased to report that customer repairs to the damaged boiler at the Red Hill's power plant are progressing and would believe the boiler issue should be resolved and the plant fully operational by the 4th quarter. As you can see from our financials, the coal mining segment's revenues decreased primarily due to fewer coal deliveries as a result of the plant running on only one boiler.

Speaker Change: Christy will go into more detail about our second quarter earnings and provide an overview of our outlook in a minute but first but first let me give you an update on our operations

Christy: I'll start with our coal mining segment, which saw the biggest year-over-year improvement.

Christy: I'm pleased to report that customer repairs to the damaged boiler at the Red Hills Power Plant are progressing and we believe the boiler issue should be resolved and the plant fully operational by the fourth quarter.

John C. Butler: As you can see from our financials, the coal mining segment's revenues decreased, primarily due to fewer coal deliveries as a result of the plant running on only one boiler. We look forward to seeing deliveries increase as the plant returns to normal operations with two boilers. Despite lower customer demand, Mississippi Lignite Mining Company's Red Hills Mine operated more efficiently this quarter than during 2023. However, our production costs still remain above historical levels, and they are expected to stay high until deliveries return to normal later this year.

Speaker Change: As you can see from our financials, the coal mining segment's revenues decreased primarily due to fewer coal deliveries as a result of the plant running on only one boiler. We look forward to seeing deliveries increase as the plant returns to normal operations with two boilers.

JC Butler: We look forward to seeing deliveries increase as the plant returns to normal operations with two boilers. Despite lower customer demand, Mississippi lignite mining companies Red Hill's mine operated more efficiently this quarter than during 2023. If you recall, last year we were in the midst of moving to a new mine area and contending with difficult mining conditions related both to the move and to new weather. This year, we are established in the new mine area, and mining conditions have improved, allowing us to operate more efficiently, which helped year-over-year results. Our production costs still remain above historical levels, and they're expected to stay high until deliveries return to normal later this year.

JC Butler: I'd also like to note the improvement in our earnings and our unconsolidated coal mining operations. You may recall that when Rainbow Energy acquired the Coal-Creak Station power plant in 2022, we provided temporary price concessions to help facilitate the transaction. At the end of May, these price concessions ended, which contributed to the increase in our coal mining segment results. Our North American mining segment also delivered strong year-over-year earnings improvement. North American mining's operating profit improved 39%, and segment adjusted the EVA DAH increased 36% compared to 2023. I am pleased with the progress the North American mining team has made on operational and strategic projects that contributed to the improved 2024 second quarter results.

Speaker Change: I'd also like to note the improvement in our earnings and our unconsolidated coal mining operations. You may recall that when Rainbow Energy acquired the Coal Creek Station power plant in 2022, we provided temporary price concessions to help facilitate the transaction.

Speaker Change: At the end of May, these price concessions ended, which contributed to the increase in our coal mining segment results.

Speaker Change: North American Mining's operating profit improved 39% and segment-adjusted EBITDA increased 36% compared with 2023.

JC Butler: This includes diversification into additional minerals, such as mining phosphate for a new customer in Florida. Overall, I believe we were making meaningful progress toward building this segment into a very successful business platform. At Minerals Management, second quarter operating profit increased over the prior year because of the gain on sale I mentioned previously. Excluding the gain, mineral management's earnings were down year-over-year, primarily due to a 39% decline in minerals management revenues, largely driven by substantially lower natural gas and oil prices. The Catapult Minerals Partners team, which oversees this segment, has done a great job of growing and diversifying our portfolio of mineral interests over the last few years.

John C. Butler: Overall, I believe we're making meaningful progress toward building this segment into a very successful business platform. The Catapult Minerals Partners team, which oversees this segment, has done a great job of growing and diversifying our portfolio of mineral interests over the last few years. They have expanded our portfolio of mineral interests, and we are more diversified in terms of operators, geographic footprint, and stages of mineral development, ranging from producing wells to undeveloped mineral interests.

Speaker Change: Overall, I believe we're making meaningful progress toward building this segment into a very successful business platform.

Speaker Change: At Minerals Management, second quarter operating profit increased over the prior year because of the gain on sale I mentioned previously.

Speaker Change: Excluding the gain, mineral management's earnings were down year over year, primarily due to a 39% decline in minerals management revenues, largely driven by substantially lower natural gas and oil prices.

Speaker Change: The Catapult Minerals Partners team, which oversees this segment, has done a great job of growing and diversifying our portfolio of mineral interests over the last few years.

JC Butler: They have expanded our portfolio of mineral interests, and we are more diversified in terms of operators, geographic footprint, and stages of mineral development, ranging from producing wells to undeveloped mineral interests. Catapult team is targeting mineral interest investments of up to $20 million in 2024. Finally, moving to our mitigation resources of North America, business results were down year-over-year due to a change in the mix of projects. However, this team continues to execute existing mitigation and reclamation projects and build on the substantial foundation that is established over the past several years. As I mentioned last quarter, Mitigation Resources is advancing its business plan more quickly than we anticipated.

John C. Butler: The Catapult team is targeting mineral interest investments of up to $20 million in 2024. Overall, I continue to be very optimistic about our outlook for the remainder of 2024 and beyond. I have a lot of confidence in our team, and I'm pleased with the way all of these businesses continue to advance their strategies, including efforts to protect our coal mining business. With that, I'll turn the call back over to Christy to cover our results for the quarter and our outlook in more detail. Christy?

Speaker Change: Catapult team is targeting mineral interest investments of up to 20 million dollars in 2024.

Speaker Change: However, this team continues to execute existing mitigation and reclamation projects and build on a substantial foundation as established over the past several years.

Speaker Change: As I mentioned last quarter, Mitigation Resources is advancing its business plan more quickly than we anticipated. As this business matures, we believe it can provide solid rates of return on capital employed.

JC Butler: As this business matures, we believe it can provide solid returns, rates of return on capital employed.

JC Butler: Overall, I continue to be very optimistic about our outlook for the remainder of 2024 and beyond. I have a lot of confidence in our team, and I'm pleased with the way all of these businesses continue to advance their strategies, including efforts to protect our coal mining business.

Christina Kmetko: With that, I'll turn the call back over to Christie to cover our results for the quarter and our outlook in more detail.

Speaker Change: With that, I'll turn the call back over to Christy to cover our results for the quarter and our outlook in more detail. Christy?

Elizabeth Loveman: Christie? Thank you, JC. Let me begin with some high-level comments about our consolidated second quarter financial results. Then I'll provide some detail on our individual segments. For the 2024 second quarter, we reported consolidated income before taxes of $6.2 million and net income of $6 million, or 81 cents per share. This compared to income of 4 taxes of $3.3 million and net income of $2.5 million or $0.34 cents per share in 2023. EBITDA was $13.5 million compared with $9.2 million last year. The $4.5 million pre-tax gain on sale that JC mentioned earlier is included in these results.

Christy: Thank you, J.C. Let me begin with some high-level comments about our consolidated second quarter financial results, then I'll provide some detail on our individual segments. For the second quarter of 2024, we reported consolidated income before taxes of $6.2 million and net income of $6 million, or $0.81 per share. This compared to income before taxes of $3.3 million and net income of $2.5 million, or $0.34 per share, in 2023. EBITDA was $13.5 million compared with $9.2 million last year.

Christy: The $4.5 million pre-tax gain on sale that J.C. mentioned earlier is included in these results. While our operating profit increased even after excluding the gain, the same can't be said for income before taxes, net income, and EBITDA. A $2.6 million year-over-year unfavorable change in other expense more than offset the operating profit improvement. This change was driven by higher net interest expense due to an increase in debt levels and lower cash levels, as well as unfavorable changes in the market value of equity securities.

Christy: This compared to income before taxes of $3.3 million and net income of $2.5 million or $0.34 per share in 2023.

Speaker Change: EBITDA was $13.5 million compared with $9.2 million last year.

Elizabeth Loveman: While our operating profit increase even after excluding the gain, the same can't be said for income 4 taxes, net income, and EBITDA. A $2.6 million year-over-year unfavorable change in other expense more than offset the operating profit improved. This change was driven by higher net interest expense due to an increase in debt levels and lower cash levels, as well as unfavorable changes in the market value of equity securities. It is worth noting that neither of those unfavorable changes are tied directly to operations. This change was driven by higher net interest investment and mitigation resources gross profits as JC already discussed, and an increase in an allocated employee related expenses.

Speaker Change: While our operating profit increased even after excluding the gain, the same can't be said for income before taxes, net income, and EBITDA. A $2.6 million year-over-year unfavorable change in other expense more than offset the operating profit improvement.

Christy: Excluding the gain on sale, operating profit grew primarily due to significant improvements in earnings at our coal mining and North American mining segments. Our coal mining segment reported operating profit of $2.8 million and generated segment adjusted EBITDA of $5.7 million. This compares to an operating loss of $4.7 million and just below break-even segment-adjusted EBITDA in 2023. J.C. generally discussed the reasons for the higher coal mining segment results

Speaker Change: Excluding the gain on sale, operating profit grew primarily due to significant improvements in earnings at our coal mining and North American mining segments.

Speaker Change: These unfavorable items were partly offset by lower minerals management and mitigation resources, gross profits, as J.C. already discussed, and an increase in unallocated employee-related expenses.

Elizabeth Loveman: Our coal mining segment reported operating profit of $2.8 million and generated segment adjusted EBITDA of $5.7 million. This compares to an operating loss of $4.7 million and just below break even segment adjusted EBITDA in 2023. JC generally discussed the reasons for the higher coal mining segment results. I would note that in addition to the favorable Mississippi Lignite mining company results and higher fall clerk pricing, an increase in customer requirements at the unsolidated operations, as well as higher sub being reclamation earnings, also contributed to the profit improvement. At North American mining, operating profit of $3.1 million and EBITDA of $5.5 million increased significantly compared with last year.

Christy: I would note that in addition to the favorable Mississippi Lignite Mining Company results and higher Falkirk pricing, an increase in customer requirements at the unconsolidated operations as well as higher Sabine Reclamation earnings also contributed to the profit improvement. At North American Mining, operating profit of $3.1 million and EBITDA of $5.5 million increased significantly compared with last year. The second quarter improvements were due to several factors, including an increase in customer requirements, favorable pricing and delivery mix, improved margins at the limestone quarries resulting from mutually beneficial contract amendments, and commencement of the new 15-year contract to mine phosphate that J.C. mentioned.

Elizabeth Loveman: The second quarter improvements were due to several factors: an increase in customer requirements, favorable pricing and delivery mix, improved margins at the limestone quarries resulting from mutually beneficial contract amendments, and commencement of the new 15-year contract to mine phosphate that JC mentioned. Looking forward, we expect our coal mining segment operating profit to increase significantly in both the 2024 second half and full year compared with the respective 2023 periods. This improvement occurs with or without the $60.8 million impairment charge taken in the fourth quarter 2023. Higher segment adjusted EBITDA, which excludes the impairment charge, is also projected for both periods.

J.C.: An increase in customer requirements, favorable pricing and delivery mix.

Speaker Change: and commencement of the new 15-year contract to mine phosphate that J.C. mentioned.

Christy: Looking forward, we expect our coal mining segment operating profit to increase significantly in both the 2024 second half and full year compared with the respective 2023 periods. This improvement occurs with or without the $60.8 million impairment charge taken in Q4 2023. Higher segment adjusted EBITDA, which excludes the impairment charge, is also projected for both periods. The year-over-year improvements are primarily due to mutually advantageous limestone contract amendments, a scope of work expansion with another customer, and the second quarter 2024 commencement of mining at the new phosphate mine.

J.C.: Higher segment adjusted EBITDA, which excludes the impairment charge, is also projected for both periods.

Elizabeth Loveman: These anticipated increases are primarily due to an expected substantial improvement in results at Mississippi Lignite Mining Company and higher earnings at the unsolidated coal mining operations. The projected increase in second half 2024 earnings at the unsolidated coal mining operations is driven primarily by an expectation for increased customer requirements at Tow and Fall Clerk as well as a higher per ten management fee at Fall Clerk due to the cessation of temporary price concessions. Second half 2024 results are also expected to increase significantly over the 2024 first half due to current expectations that the boiler issue at Mississippi Lignite Mining Company's customers' plant will be resolved and the plant will be fully operational by the fourth quarter of 2024.

J.C.: as well as a higher per ton management fee at Falkirk due to the cessation of temporary price concessions.

Elizabeth Loveman: Turning to North American mining, we expect operating profit and segment adjusted EBITDA to increase in both the 2024 second half and full year over the respective 2023 periods that decreased from the 2024 first half. The year-over-year improvements are primarily due to mutually advantageous limestone contract amendments, a scope of work expansion with another customer, and the second quarter 2024 commencement of mining at the new phosphate mine. Erning's in the second half are expected to moderate from the first half of the year to the anticipated lower customer requirements. Finally, at Mineral's Management, we expect 2024 second half and full-year operating profit and segment adjusted EBITDA to increase over the respective 2023 periods, excluding the fourth quarter impairment charge of $5.1 million.

J.C.: Turning to North American mining, we expect operating profits and segment-adjusted EBITDA to increase in both the 2024 second half and full year over the respective 2023 periods, but decrease from the 2024 first half.

J.C.: Earnings in the second half are expected to moderate from the first half of the year due to anticipated lower customer requirements.

Elizabeth Loveman: These improvements are primarily driven by current market expectations for natural gas and oil prices, as well as development and production assumptions on currently-owned reserves. Based on current market expectations, operating profit in the second half of 2024 is expected to increase moderately compared with the first half, excluding the $4.5 million gain on sale recognized in the second quarter. As I mentioned, our second half, 2023 results included a pre-tax impairment charge, totaling $65.9 million. My upcoming comments about our expected consolidated results exclude the effect of this charge. We expect our consolidated second half operating profits to increase compared with both the first half of 2024 and second half of 2023.

J.C.: These improvements are primarily driven by current market expectations for natural gas and oil prices, as well as development and production assumptions on currently owned reserves.

Christy: Based on current market expectations, operating profit in the second half of 2024 is expected to increase moderately compared with the first half, excluding the $4.5 million gain on sale recognized in the second quarter. As I've mentioned, our second half 2023 results included a pre-tax impairment charge totaling $65.9 million. My upcoming comments about our expected consolidated results exclude the effect of this charge. However, this improvement is anticipated to be partly offset by higher income tax expense and an increase in net interest expense because of additional borrowings and lower cash levels.

J.C.: As I've mentioned, our second half 2023 results included a pre-tax impairment charge totaling $65.9 million. My upcoming comments about our expected consolidated results exclude the effect of this charge.

Elizabeth Loveman: These improvements are primarily due to anticipated increases in profitability at the coal mining segment, and contributions from North American mining grow in profit improvement initiative. We also expect consolidated net income in the 2024 second half and full-year to increase compared with the respective 2023 periods. This improvement is anticipated to be partly offset by higher income tax expense and an increase in net interest expense because of additional borrowings and lower cash levels.

J.C.: Profit Improvement Initiative

J.C.: We also expect consolidated net income in the 2024 second half and full year to increase compared with the respective 2023 periods.

J.C.: This improvement is anticipated to be partly offset by higher income tax expense and an increase in net interest expense because of additional borrowings and lower cash levels.

Elizabeth Loveman: All that said, we are taking steps to terminate our defined benefit pension plan. We anticipate the termination will result in a non-cash settlement charge in the 2024 fourth quarter, which is expected to partly offset the improvements in the second half operating profit. As a result, we are projecting that consolidated net income and adjusted EBITDA will decrease in the second half of 2024 compared with the first half of the year. While the company anticipates that third quarter net income will improve significantly over the second quarter, fourth quarter net income is expected to be substantially lower than both the third quarter and prior year fourth quarter, mainly as a result of the anticipated non-cash pension settlement charge.

Christy: All that said, we are taking steps to terminate our Defined Benefit Pension Plan. We anticipate the termination will result in a non-cash settlement charge in the 2024 fourth quarter, which is expected to partly offset the improvements in the second half operating profit. As a result, we are projecting that consolidated net income and adjusted EBITDA will decrease in the second half of 2024 compared with the first half of the year. While the company anticipates that third quarter net income will improve significantly over the second quarter, fourth quarter net income is expected to be substantially lower than both the third quarter and prior year fourth quarter, mainly as a result of the anticipated non-cash pension settlement charge.

J.C.: As a result, we are projecting that consolidated net income and adjusted EBITDA will decrease in the second half of 2024 compared with the first half of the year.

J.C.: While the company anticipates that third quarter net income will improve significantly over the second quarter, fourth quarter net income is expected to be substantially lower than both the third quarter and prior year fourth quarter, mainly as a result of the anticipated non-cash pension settlement charge.

Elizabeth Loveman: Before I turn the call over to questions, let me close with some information about our balance sheet and cash flow. We ended the quarter with consolidated cash for approximately $62 million in debt, $61 million. We had availability of $89 million under our revolving credit facility. During the second quarter, we repurchased approximately 108,000 shares for $3.3 million under an existing share repurchase program. In 2024, we expect cash trouble for financing activities to be a use of cash.

Christy: Before I turn the call over to questions, let me close with some information about our balance sheet and cash flow. We ended the quarter with consolidated cash of approximately $62 million and debt of $61 million. We had availability of $89 million under our revolving credit facility. During the second quarter, we repurchased approximately 108,000 shares for $3.3 million under an existing share repurchase program. In 2024, we expect cash flow before financing activities to be a use of cash. Now, we will turn to any questions you may have.

J.C.: Before I turn the call over to questions, let me close with some information about our balance sheet and cash flow. We ended the quarter with consolidated cash of approximately $62 million and debt of $61 million. We had availability of $89 million under our revolving credit facility.

J.C.: During the second quarter, we repurchased approximately 108,000 shares for $3.3 million under an existing share repurchase program. In 2024, we expect cash flow before financing activities to be a use of cash. We will now turn to any questions you may have.

Operator: We will now turn to any questions you may have. Thank you, ladies and gentlemen. If you'd like us a question, please press star one on your telephone keypad. To which right question, press star two.

Operator: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 2. One moment please for your first question. Your first question comes from Douglas Weiss from DSW Investments. Please go ahead. Hey, good morning.

Speaker Change: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 2. One moment please for your first question.

Operator: One moment, please, for your first question.

Douglas Weiss: Your first question comes from Douglas Weiss from DSW Investment. Please go ahead.

J.C.: Your first question comes from Douglas Weiss from DSW Investments. Please go ahead. Hi, good morning.

Douglas Weiss: Hey, good morning. First question on North American mining: it sounds like you're optimistic about the growth prospects for that business. And I wondered if you could just talk a little bit about adding customers, both in terms of product lines and whether you're expanding business, existing customers, or completely new customers.

Douglas Weiss: How are you? Good morning.

Douglas Weiss: First question on North American mining. You know, it sounds like you're optimistic about the growth prospects for that business. And I wondered if you could just talk a little bit about where you see the greatest opportunities to add customers, both in terms of product lines and whether you're expanding business, existing customers are completely new, new customers.

John C. Butler: It's a good, excellent question. I would say, you know, we've had considerable success with expanding our relationships with existing customers, that that has happened quite frequently over the last several years as we started growing this business, but we also have added a lot of new customers, we've added new geography, we've increased the range of equipment that we operate as well. So I think what you're going to see and what we expect to happen is, you know, in various stages of development. Is that helpful? Yeah, that's...

Douglas Ruiz: Good morning.

Douglas Ruiz: First question on North American mining, it sounds like you're optimistic about the growth prospects for that business, and I wondered if you could just talk a little bit about it.

Speaker Change: where you see the greatest opportunities to

JC Butler: That's a good, excellent question. I would say, you know, we've had considerable success with expanding our relationships with existing customers. That's happened quite frequently over the last several years as we started growing this business. But we also have added a lot of new customers. We've added a lot of new geography. We've increased the range of equipment that we operate as well.

Speaker Change: That's a good, excellent question.

Speaker Change: I would say, you know, we've had considerable success.

Speaker Change: with expanding our relationships with existing customers, you know, that that's happened quite frequently over the last

Speaker Change: several years as we started growing this business. But we also have added a lot of new customers, we've added a lot of new geography, we've increased the range of equipment that we operate as well.

JC Butler: You know, I mean, about nine years ago, eight years ago, I really got focused on growing this business. At the time, we were operating drag lines to mine limerock underwater for customers in Florida. And we said, gosh, it doesn't have to be a drag line. It doesn't have to be just limestone, and it doesn't have to be in Florida. And that's really where we've been pushing ever since, with a lot of success. So I think what you're going to see and what we expect to happen is growth with existing customers. But I also think we're going to be adding new customers, new contracts, expanding the range of equipment that we operate.

Speaker Change: Thank you.

Speaker Change: about nine years ago, eight years ago, I really got focused on growing this business.

Speaker Change: At the time, we were operating drag lines to mine lime rock underwater for customers in Florida.

Speaker Change: And we said, gosh, it doesn't have to be a drag line, it doesn't have to be just limestone, and it doesn't have to be in Florida. And that's really where we've been pushing ever since, with a lot of success.

Speaker Change: So, I think what you're going to see and what we expect to happen...

Speaker Change: is

Speaker Change: You know

Speaker Change: new customers, new contracts.

JC Butler: You know, we a good example of that is we're currently operating a surface minor, which is a lot like the machines that you see, you know, planning asphalt on highways that they're much larger. You know, we're currently using that with a customer to mine limerock with great success. And we think that it's a tricky piece of equipment. And we've got particular expertise in operating that piece of equipment. We think there's a lot of opportunities there as an example. We, of course, would continue to expand, expand, you know, operating our drag line piece of the business.

Speaker Change: A good example of that is we're currently operating a surface miner, which is a lot like the machines that you see planing asphalt on highways, but they're much larger. We're currently using that with a customer to...

Speaker Change: It's a tricky piece of equipment, and we've got particular expertise in operating that piece of equipment. We think there's a lot of opportunities there, as an example.

Speaker Change: We, of course, will continue to expand, you know, operating our drag line piece of the business.

JC Butler: Again, it specialized complicated piece of equipment that we've got particular skills at operating. And, you know, we operate truck-to-truck shovel operations too. So I think the opportunities that we have are pretty substantial across the board.

Speaker Change: Again, it's a specialized, complicated piece of equipment. We've got particular skills at operating.

Speaker Change: And, you know, we operate truck-to-truck shovel operations, too. So I think the opportunities that we have are pretty substantial across the board.

JC Butler: I guess I add to that, you know, we have customer relationships in that segment that really aren't delivering significant profit yet. And a great example of that is lithium. in Northern Nevada. That's currently in the development stage. It's been in development stage for a few years. We expect that to really ramp up over the next few years, and we should be producing lithium and earnings substantially more money there a few years from now. So, some of the future growth is already under contract. Others are in various stages of development. Is that helpful?

Speaker Change: I guess I'd add to that, you know, we have customer relationships in that segment that really aren't delivering significant profit yet, and a great example of that is the lithium

Speaker Change: operation in Northern Nevada.

Speaker Change: you know, under contract. Others...

Douglas Weiss: Yeah, that's great. All right.

Douglas Weiss: Yeah, that's great. So, one of your aggregate customers is expanding business with you. Is that because they feel like you're just better at those regular tasks, and it's cheaper for them to have you do it than with themselves? Is that what's happening? Yeah, I mean, this is what we do.

Speaker Change: You know, we're in various stages of development. Is that helpful?

Douglas Weiss: If one of your agri-customers is expanding business with you, is that because they feel like you're just better at those particular tasks, and it's cheaper for them to have you do it than do it themselves? Is that what's happening?

Speaker Change: Yeah, that's great. So, if one of your agri-customers

Speaker Change: You're just better at, you know, at those particular tasks, and it's cheaper for them to have you do it than do it themselves? Is that what's happening?

Speaker Change: Yeah, yeah, I mean, this is, this is what we do. You know, I, it's been a couple years ago, but I remember having dinner with, you know, one of the

JC Butler: It's been a couple of years ago, but I remember having dinner with one of the very, very large producers of aggregates. Some of their regional senior leadership team and guys said, we are great at identifying the markets and understanding the products we need and figuring out how to capitalize on all of that. He said, "We are not miters." We need your expertise to make sure we've got the products we need in the quantities we need and the qualities we need when we need them. And, you know, this is our expertise, and we come in and, you know, I think in every instance, we've improved productivity, we've improved, you know, cost positioning.

John C. Butler: Very, very large producers of aggregates. Some of their regional senior leadership team and guys said, we are great at identifying the markets and understanding the products we need and figuring out how to capitalize on all of that. He said, "We are not miners. And we need your expertise to make sure we've got the products we need and the quantities we need and the qualities we need when we need them. And this is our expertise, and that's where we come in. Mm-mm.

Speaker Change: We are great at identifying the markets and understanding the products we need.

Speaker Change: figuring out how to capitalize on all of that.

Speaker Change: He said, we are not miners and we need your expertise to make sure we've got the products we need and the quantities we need and the qualities we need when we need them. And, you know, this is this is our expertise and we come in and

Speaker Change: You know, I think in every instance we've improved productivity, we've improved cost positioning, we help our customers be successful in their business.

Douglas Weiss: We've helped; we help our customers be successful in their business. Mm-hmm.

Douglas Weiss: Do you, you know, on the FOSS-based diet, are you seeing an opportunity to bring on more phosphate customers?

Speaker Change: On the phosphate side, are you seeing an opportunity to bring on more phosphate customers?

JC Butler: Well, I mean, not as a guy who's worked at business development for a long time, I will say absolutely, right? We're looking at all sorts of additional customers, but I will tell you, we've spent a number of years looking for the right opportunity to start providing mining services into that part of the, you know, the mining world.

John C. Butler: I mean, as a guy who's worked in business development for a long time, I will say absolutely. Right? We're looking at all sorts of additional customers. But I will tell you, we've spent a number of years looking for the right opportunity to start providing mining services in that part of the mining world. So this is really very new and very fresh for us. But sure, you know, there's no reason we couldn't find more phosphates.

Speaker Change: Well

Speaker Change: I mean, as a guy who's worked in business development for a long time, I will say absolutely, right? We're looking at all sorts of additional customers, but I will tell you we've spent a number of years

Douglas Weiss: So this is really very new and very fresh for us. But, sure, you know, there's no reason we couldn't find more FOSS-based. Okay.

Douglas Weiss: So moving on to general management. You know, I asked you a little bit last quarter about the reserve base. And another way I thought of asking a similar question is, you know, the goal was not to grow your inventory, but just to replenish the depleted inventory or the drilled inventory. In the sense of what the capital cost of that would be? No, is the short answer. You know, we're on a $20 million a year pace, you know, which is an investment, the reinvestment pace. And that is growing. The Business. So it's going to be a number less than $20 million, but I don't know if that number would be.

John C. Butler: and Rural Management.

Speaker Change: and Rural Management.

Speaker Change: I asked you a little bit last quarter about the reserve base, and another way I thought of asking a similar question is, is that the sense...

Speaker Change: If the goal were not to grow your inventory, but just to replenish...

John C. Butler: Hmm, no, is the short answer. You know, we're on a $20 million a year pace, which is an investment reinvestment pace, and that, um, is growing.

Speaker Change: No, is the short answer. You know, we're on a $20 million a year pace.

Speaker Change: which is a reinvestment pace, and that is growing.

Speaker Change: The business.

Speaker Change: So it's going to be a number less than $20 million.

Douglas Weiss: Okay, and I'm more granular level there.

Speaker Change: But I don't know what that number would be.

Speaker Change: Okay, and on a more granular level there, I was a little surprised to see the oil production down given the investments made last year. I don't know if you're able to provide any...

Douglas Weiss: As a little surprise to speed the oil production down, given the investment made last year, I don't know if you're able to provide any sort of color on whether that was just a short term. That's a good question. The, you know, I would say part of this is because unlike a number of other mineral investors who, you know, those guys, any of them that are privately backed or doing this with a lot of leverage, you know, they're buying primarily active producing wells because they need to feed the machine. Whether they're a yield code or, you know, trying to service their debt or satisfy their sponsor needs.

John C. Butler: You know, in the short term...

John C. Butler: It's a good question. The, you know, I would say part of this any of them that are private equity backed or doing this with a lot of leverage, you know, they're buying primarily active producing wells because they need to feed the machine, whether they're a yield co or, you know, trying to service their debt or satisfy their sponsor needs. We're really doing this for the very long term.

Speaker Change: It's a good question. I would say part of this is because unlike a number of other mineral investors who, you know, those guys...

Speaker Change: Any of them that are private equity backed or doing this with a lot of leverage, you know, they're buying primarily, you know, active producing wells because they need to feed the machine, whether they're a yield co or, you know, trying to service their debt or satisfy their

JC Butler: We're really doing this for the very long term, and we're happy to buy things that are producing, as well as things that might produce in two years, five years, ten years, or longer. So you shouldn't necessarily assume that because we did a significant acquisition, that that's going to immediately drop to the bottom line. You know, we, we value these, you know, these acquisitions when we're looking at the package that's being offered. We look at the whole range of assets there, assigned values to them in a, you know, sort of a very detailed NPV kind of approach, making estimates about when we think things might develop them.

John C. Butler: And we're happy to buy things that are producing as well as things that might produce in two years, five years, 10 years or longer. So when we're looking at the package that's being offered, we look at the whole range of assets there, assign values to them in a, you know, sort of a very detailed NPV kind of approach, making estimates about when we think things might get developed. And that's how we assess value and what we're willing to pay. But it's not all producing wells that are going to immediately show.

Speaker Change: You know, sort of a very detailed NPV kind of approach, making estimates about when we think things might get developed, and that's how we assess value and what we're willing to pay. But it's not all producing wells that are going to immediately show.

Douglas Weiss: That's how we assess value and what we're willing to pay, but it's not all producing wells that are going to immediately show, you know, results on the bottom line. Okay.

Speaker Change: you know, results on the bottom line. Okay.

Douglas Weiss: Makes sense.

Douglas Weiss: And the coal operation, your projected capital spend for the second half is a little higher than the first half. And I think in some prior calls you had...

Douglas Weiss: And the coal operation, your cap, your projected capital spend for the second half is a little higher than the first half. And I think some prior calls you had commented that you were going to be limiting capital spend on your coal assets. So I'm curious whether that is a bit of a change in approach or whether there's just one-time things that you need to spend on.

Speaker Change: On the coal operation, your projected capital spend for the second half is a little higher than the first half. And I think in some prior calls you would...

Speaker Change: You were going to be limiting capital spend on your coal assets, so I was curious whether that...

Speaker Change: is a bit of a change in approach, or whether there's just one-time things that you need to spend on?

JC Butler: Well, so I'd say, you know, I just want to clarify: you used the word limiting. And I would tell you that we, I mean, we certainly spend a lot of time with our operating folks and our engineers thinking about what is the most effective and efficient way to invest capital. I mean, obviously, you know, you know, you don't want to over-invest. We want to find the exact right tool to do the job when we're looking to spend capital. We would, we would not limit, you know, tell these guys, gee, you can only have half as much as you need because that's going to, that's going to adversely affect your ability to operate.

John C. Butler: So I'd say, you know, I just want to clarify that you used the word limiting. And I would tell you that we certainly spend a lot of time with our operating folks and our engineers thinking about what is the most effective and efficient way to invest capital. I mean, obviously, you don't, you know, you don't want to over invest. We want to find the exact right tool to do the job when we're looking to spend capital.

Speaker Change: And I would tell you that we certainly spend a lot of time

Speaker Change: thinking about what is the most effective and efficient way to invest capital. I mean obviously you don't you know you don't want to over invest we want to find the exact right tool to do the job when we're looking to spend capital.

JC Butler: It's going to adversely affect your ability to be efficient and, you know, optimize efficiency. So, we balance that out very carefully.

Speaker Change: Adversely affect their ability to operate. It's going to adversely affect their ability to be efficient and, you know, optimize efficiency. So we balance that out very carefully.

JC Butler: What we are doing, you know, the only place in the coal mining segment where we really spend capital is at MLNC, and as we've come through the development of mine area 3, and really now fully operating over there, we've expected the CAPEX to drop off over time. The ship between quarters or the ship between first part of the year and last part of the year is probably more related to timing of some of those investments or one time things. But we overall expect the CAPEX in our coal mining business, which is really only focused at the Red Hills mine, MLNC, because of the structure of the other contracts, but a customer pays the CAPEX.

Speaker Change: what we

Speaker Change: arguing, you know, the only place in the coal mining segment where we really spend capital is at MLMC.

Speaker Change: The shift between quarters, or the shift between first part of the year and last part of the year, is probably more related to timing of some of those investments.

Speaker Change: or one-time things, but we overall expect to tap that in our coal mining business, which is really only focused on

JC Butler: You know, we really think that CAPEX is going to drop off significantly over the next several years compared to what it's been. Okay.

Douglas Weiss: And then I had asked you earlier in the year whether you thought you would get an insurance recovery on the boiler outage. Do you have any more visibility on that?

Speaker Change: Okay.

Douglas Weiss: I asked you early in the year whether you thought you would get an insurance recovery on the boiler outage.

Speaker Change: Um, and then...

Speaker Change: I had asked you earlier in the year whether you thought you would get an insurance recovery on the boiler outage.

Speaker Change: Do you have any more visibility on that?

JC Butler: I mean, I'll give you a mixed answer here. Yes, we have more visibility to that. We have a team of people that are continuing to work on that.

John C. Butler: I mean, I'll give you a mixed answer here. Yes, we have more visibility into that. We have a team of people that are continuing to work on that. But I'm not. The other part of the answer is I'm not. I'm not prepared to make any kind of statement about what

Speaker Change: I mean, I'll give you a mixed answer here. Yes, we have more visibility to that. We have a team of people that are continuing to work on that. I'm not, the other part of the answer is, I'm not, I'm not prepared to make any kind of statement about what that might be.

JC Butler: I'm not the other part of the answer is I'm not prepared to make any statement about what that might be. I think it would be very premature for me to throw out a number. Got it.

Speaker Change: I just think it would be very premature for me to throw out a number.

Douglas Weiss: On free cash flow, it looks like so far this year working capital has been a drag on free cash. Does that reverse later in the year so that... you generate cash on the operating line or, Liz or Christy, have you got...

Douglas Weiss: I'm free cash flow. It looks so far this year working capital has been a drag on free cash. Is that reverse later in the year so that you generate cash on the operating line or?

Speaker Change: On free cash flow, so far this year working capital has been a drag on free cash. Does that reverse later in the year?

Elizabeth Loveman: I didn't catch. There was a comment made at the end of the presented remarks, so I think it's something to that as well.

Speaker Change: You generate cash on the operating line, or...

Speaker Change: I didn't catch, there was a comment made at the...

Speaker Change: The end of the presented remarks that I think put something to that effect. Liz or Christy, have you got...

Elizabeth Loveman: Liz or Christie, have you got? We did include in our disclosure that we expect to have a use of cash in 2024. The operating cash flow line or? We just had a full cash flow before financing, which is that's our operating cash minus CAPEX. Right. Okay. Working capital for us.

Christy: We we did!

Speaker Change: We did include in our disclosure that we expect to have a use of cash in 2024. The operating cash flow line or... We just said cash flow before financing.

Christy: Which is, that's our operating cash minus CapEx.

Christy: But working capital for us, you know, if you think about our businesses, we are not like a typical manufacturing company that's constantly looking at, you know, days outstanding, whether it's receivables or payables or inventory levels. We don't, you know, we're not really manufacturing anything. Inventory will go up and come down. So I'll give you a very specific example of that. If we're getting, and I'm not saying we're doing that right now, this is just an example, but if we're getting ready to do, you know, a significant capital project on a drag line somewhere, in anticipation of that, we will probably bring in more parts. We'll probably bring in more parts because we need them ready when we take a drag line down in order to go tackle that project.

Elizabeth Loveman: If you think about our businesses, we are not like a typical manufacturing company that's constantly looking at days outstanding, whether it's receivables or payables or inventory levels. We don't know. We're not really manufacturing anything. Inventory will go up and come down. So I'll give you a very specific example of that. If we're getting, and I'm not saying we're doing that right now, this is just an example. But if we're getting ready to do a significant capital project on a drag line somewhere in anticipation of that, we will probably bring in more parts. Because we need them, you know, ready when we take the drag, take a drag line down in order to go tackle that project.

Speaker Change: constantly looking at

Speaker Change: Days outstanding whether it's receivables or payables or inventory levels. We don't you know, we're not really manufacturing anything

Speaker Change: You know, ready when we take a drag line down in order to go tackle that project. And then those parts will be put into the drag line and, you know, it'll flow through working capital that affects your... You know, it goes through all the normal cycle.

Elizabeth Loveman: And then those parts will be put into the drag line and, you know, it'll slow through working capital that affects your, you know, it goes through all the normal cycle. You know, similarly we build inventory at mitigation resources in North America as we create mitigation credits, but working capital for us very much kind of normalizes over time. It's not a thing like you would see in a manufacturing business where we're dealing with supply chain issues and other things that will affect that from quarter to quarter. Right, that makes sense.

Speaker Change: Similarly, we build inventory at mitigation resources in North America as we create mitigation credits.

Christy: Working capital for us, you know, very much kind of normalizes over time. It's not a thing like you would see in a manufacturing business where we're dealing with supply chain issues and other things that will, Right. That makes sense. Okay.

Speaker Change: Working capital for us, you know, very much kind of normalizes over time. It's not a, it's not a thing like you would see in a manufacturing business where we're dealing with supply chain issues and other things that will

Douglas Weiss: Right, that makes sense. Okay, so last question, kind of a broad one, but if you look at, you know, you're kind of We feel that one segment is offering you higher ROIs at this point and that there's some...

Speaker Change: [inaudible]

Douglas Weiss: Okay, so last question, kind of a broad one, but if you look at, you know, your kind of re-disclosed business lines as well as the mitigation work you're doing, would you say that you feel one segment is offering you IRL-wise at this point in that there's some desire to do that. Do you want to invest more money into one of the segments versus others? I mean, I would tell you that if you think about our, I'm going to go inside a segment, if you went inside our management fee, unconsolidated coal mining operations, those things have, we have very, very, very little capital invested in those and they generate very substantial returns, right?

Speaker Change: disclosed business lines as well as the mitigation work you're doing.

Speaker Change: Do you feel one segment is offering you higher ROIs at this point, and that there's some

Speaker Change: desire to invest more money into one of the segments versus others.

John C. Butler: I mean, I would tell you that... If you think about our, and I'm going to go into a segment here, if you went inside our management fee, unconsolidated coal mining operation. Those things have, we have very, very, very little capital invested in them, and they generate very substantial returns, super-high return on total capital in a traditional sense. There's really not an opportunity to invest in growing the way we have the contracts we have in the coal mining segment, which generates tremendous returns.

Speaker Change: Uhmmm....

Speaker Change: I mean, I would tell you that...

Speaker Change: Those things have, we have very, very, very little capital invested in those and they generate very substantial returns, right? Super high return on total capital in a traditional sense.

JC Butler: Super high return on total capital in a traditional sense.

JC Butler: There's really not an opportunity to invest in growing that. We have the contracts we have in the coal mining segment and, you know, I'd sure if we wanted somebody to call us up and say, hey, I want to build a new coal fire power plant, will you guys do a management fee contract with us? But I don't see that happening in the short term. So that's probably our highest return on total capital. I'd say our second highest return on total capital is the returns that we earned off of our legacy natural gas assets in Appalachia, Southern Ohio, because we bought those decades and decades and decades ago.

Speaker Change: There's really not an opportunity to invest in growing that. We have the contracts we have in the coal mining segment.

Speaker Change: I'm sure we'd love it if somebody called us up and said hey I want to build a new coal-fired power plant Will you guys do a management fee contract with us, but I don't see that happening

Speaker Change: Return on Total Capital. I'd say our second highest return on total capital is the returns that we earn off of our legacy natural gas assets in Appalachia, Southern Ohio, because we bought those

JC Butler: I would guess all of those were bought more than 40 years ago. And so we have just extremely low cost basis. We've owned them for a long time. We end up with horizontal fracking and pipelines coming into the area. I mean, that piece inside Minerals Management generates tremendous returns. Our investments, our investments that we're making are actually blending down the return on total capital in that business, but we think that's fine.

Speaker Change: We've owned them for a long time. You end up with horizontal fracking and pipelines coming into the area. I mean, that piece inside minerals management...

John C. Butler: But our investment, the investments we're making, are actually blending down to the return on total capital in that business, but we think that's fine. We want to continue to invest and grow, and have an entrepreneurial bent. We're creating new businesses right now that I think are going to succeed. And we feel good about investing in all of them, you know. I think... Our overall objective here is to create a portfolio of businesses that are all generating good returns and don't leave us with any kind of significant risk in any one area.

JC Butler: I want to continue to invest and grow. So your question is really one of capital allocation. I think, you know, is it we want to direct money more to one segment than the other. I would say that we're very pleased with the portfolio of businesses that we have. I'd also tell you that we're continuing to, you know, have an entrepreneurial bent.

Speaker Change: So your question is really one of capital allocation. I think you know is it we want to direct...

JC Butler: We're creating new businesses right now that I think are going to we'll be talking more about those in the years ahead. And we feel good about investing in all of them. I think our overall objective here is to create a portfolio of businesses that are all generating good returns and don't have us with any kind of significant risk in any one area.

Speaker Change: I think our overall objective here is to create a portfolio of businesses that are all generating good returns and don't have us with any kind of significant risk in any one area.

JC Butler: If you think back a bunch, you know, ten years ago, we were essentially tied to, you know, coal mining for power generation, and there's a lot of risk in that, political risk really. So having a diversified portfolio of businesses, and we think all of them delivered good returns on total capital, to me feels like, you know, kind of the right thing to do for the business overall. That's also going to give us, I believe, over time, you know, very substantial cash flows going forward to allow us to grow this business. Because we've got so many avenues for growth now, including ones in development, I think it's going to give us lots of avenues for growth that will make this substantially more diversified and bigger company in the future.

Speaker Change: We were essentially tied to, you know, coal mining for power generation, and there's a lot of risk in that political risk really

Speaker Change: So having a diversified portfolio of businesses and we think all of them deliver good returns on total capital to me feels like you know kind of the right thing to do for the for the business overall. That's also going to give us I believe over time

John C. Butler: So, is that causing us to pick and choose, like, gee, we want to, you know, put money into our favorite businesses and maybe not into the other ones? I think right now we feel like all these businesses have great potential, and we're going to continue to invest in them. Of course, only doing so when we find projects that meet our criteria for, you know, it's a good fit with the business, it's a good customer, it's a good cultural fit, it's an opportunity where we believe we can be successful, and the contract terms are attractive.

JC Butler: So is that causing us to pick and choose like, gee, we want to, you know, put money into the favorite business and maybe not in the other ones. I think right now we feel like all these businesses have great potential, and we're going to continue to invest in them. Of course, only doing so when we find projects that meet our criteria for, you know, it's a good fit with the business. The customer is a good cultural fit. It's an opportunity where we believe we can be successful, and the contract terms are attractive to us. Right.

Speaker Change: So,

Speaker Change: only doing so when we find projects that meet our criteria for, you know, it's a good fit with the business, the customer is a good cultural fit, it's an opportunity where we believe we can be successful and the contract terms are attractive to us.

Douglas Weiss: No, it makes sense. All right.

Douglas Weiss: Well, that's all I got.

JC Butler: I appreciate the time and Dr. Nick's order. Appreciate your questions. I'm glad it makes sense to you because we think it makes sense to us. So we appreciate your questions and your feedback.

John C. Butler: I appreciate your questions. I'm glad it makes sense to you because we think it makes sense to us. We appreciate your questions and your feedback.

Operator: Ladies and gentlemen, as a reminder, if you'd like to ask a question, press star one. And there are no further questions at this time.

Christina Kmetko: I will tend to call back over to Christina for closing remarks. Okay.

Speaker Change: And there are no further questions at this time. I will turn the call back over to Christina for closing remarks.

Christina Kmetko: With that, we will conclude our Q&A session. I would like to provide a few reminders before we end the call. A replay of our call will be available later this morning. We'll also post a transcript on the website when it becomes available. If you have any questions, please reach out to me. You can reach me at the phone number on the press release.

Christina Kmetko: I hope you enjoy the rest of your day, and I'll turn it back to Julie to conclude the call.

Operator: Thank you.

Christina Kmetko: Thank you. A replay of this call will be available until Thursday, August 8, 2024 at 11.59 p.m. by dialing 888-333-4222.

Operator: Followed by the pound key. Thank you.

Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.