Q3 2024 Oceaneering International Inc Earnings Call
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And your patience.
Please continue to standby [music].
Welcome to Oceaneering third quarter 2024 earnings conference call.
David: My name is David and I'll be your conference operator.
David: All lines have been placed on mute to prevent any background noise. There will be a question and answer period. After the speakers' remarks with that I'll now turn the call over to Hilary Frisbee Oceaneering senior director of Investor Relations.
Hilary Frisbee: Thanks, David.
Hilary Frisbee: Good morning, and welcome to the Oceaneering third quarter 2024 results Conference call today's call is being webcast and a replay will be available on <unk> website.
Hilary Frisbee: Joining us on the call are Rod Larson, President and Chief Executive Officer, who will be providing our prepared comments, Alan Curtis Senior Vice President and Chief Financial Officer.
Speaker Change: Before we begin I would like to remind participants that statements. We make during the course of this call regarding our future financial performance business strategy plans for future operations and industry conditions are forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of law.
Hilary Frisbee: 1995.
Hilary Frisbee: Our comments today also include non-GAAP financial measures.
Hilary Frisbee: Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter press release, we welcome your questions. After the prepared statements I will now turn the call over to Rod.
Rod Larson: Good morning, and thanks for joining the call today.
Rod Larson: First off thank you to the many ocean years, who delivered 98 $1 million and adjusted EBITDA. Despite two large hurricanes in the Gulf of Mexico that impacted our offshore operations and three of our onshore facilities in Louisiana and Florida as.
Rod Larson: As well as absorbing an approximate $3 million or loss as we fine tuned our business portfolio and sold our maritime intelligence business I believe this speaks to both the resiliency of our oceaneering and portfolio of businesses.
Rod Larson: That being said I would.
Rod Larson: Like to highlight some of our achievements from the third quarter of 2024 as I just mentioned, we delivered $98 1 million and adjusted EBITDA, which was in line with our guidance and consensus estimates, we generated healthy free cash flow of $67 million.
Rod Larson: Since your robotics, SSR EBITDA margins continued to expand to 36%.
Rod Larson: And yes, we did a share repurchase.
Rod Larson: Now I'll focus my comments on our performance for the third quarter of 2020 for our consolidated and business segment outlook for the fourth quarter and full year of 2024, and our initial consolidated 2025 outlook.
Rod Larson: Now for our third quarter 2024 results.
Rod Larson: For the third quarter, we reported net income of $41 2 million or <unk> 40 per share on revenue of $680 million.
Rod Larson: Adjusted net income was $37 2 million or <unk> 36 per share.
Rod Larson: These adjusted results included the impact of $400000 in foreign exchange gains of $600000 tax effect on adjustments associated with foreign exchange gains.
Rod Larson: And $4 $2 million related to discrete tax adjustments.
Rod Larson: Our consolidated third quarter 2020 for operating income as compared to the third quarter 2023 was up 23% on a 7% increase in revenue or.
Rod Larson: Our improved third quarter results were primarily due to strong performance in our SSR and manufactured products segments.
Rod Larson: For the third quarter of 2020 for our consolidated adjusted EBITDA of $98 $1 million was in line with our guidance range and consensus estimates.
Rod Larson: We generated $67 million in free cash flow and are pleased to report that we repurchased 422229 shares for approximately $10 million during the third quarter of 2024, our ending cash balance was $452 million.
Rod Larson: Now, let's look at our business operations by segment for the third quarter of 2024 as compared to the third quarter of 2023.
Rod Larson: SSR operating income was 37% higher on a 9% increase in revenue.
Rod Larson: With operating income margins, expanding 623 basis points as compared to third quarter of 2023.
Rod Larson: EBITDA margin also improved over the same period last year to 36% from 31% due to improved RV pricing and execution performance improvements in our tooling survey groups and ongoing cost control measures.
Rod Larson: Average <unk> revenue per day utilized of $10576 was 13% higher and fleet utilization of 69% and days utilized of 50 15796 were both essentially flat as compared to the third quarter of 2023.
Rod Larson: RV fleet used during the third quarter of 2024 was 66% in drill support and 34% in vessel based activity compared to 61% and 39% respectively in.
Rod Larson: In the same period of 2023.
Rod Larson: The revenue split between our RV business, and our combined tooling and survey businesses as a percentage of our total SSR revenue.
Rod Larson: It was 77% and 23% as compared to 76% and 24% respectively in the third quarter of 2023.
Rod Larson: At the end of September we had 59% of the contracted floating rig market in RV contracts on 85% of the 145 floating rigs under contract.
Rod Larson: Turning to manufactured products compared to the third quarter of 2023 operating income was $11 $3 million, an increase of 37% on a 17% increase in revenue.
Rod Larson: Order intake during the quarter was solid and our backlog on September 30 of 2024 was $671 million, an increase of $115 million over the third quarter of 2023.
Rod Larson: Book to Bill ratio was one to one for the trailing 12 months.
Rod Larson: Our offshore projects group of LPG third quarter 2020 for revenue operating income and operating income margin decline as compared to the third quarter of 2023.
Rod Larson: The declines were due to changes in project mix, which was more focused on lower margin inspection maintenance and repair or INR services and in the same quarter in the prior year as well as vessel crane repair costs and the associated vessel downtime.
Rod Larson: Integrity management and digital solutions, our MTS third quarter 2020 for operating income and operating income margin both declined as compared to the same quarter in the prior year on an 11% increase in revenue to.
The decline was due to the onetime noncash charge associated with the divestiture of our Maritime Intelligence Division in September of 2024.
Rod Larson: Notwithstanding this onetime charge operating results in the core <unk> businesses improved in the third quarter of 2024 as compared to the third quarter of 2023.
Rod Larson: Aerospace and defense technologies or AD Tech third quarter 2024 revenue was essentially flat as compared to the third quarter of 2023, while operating income and operating income margins decreased due to increased project proposal costs associated with anticipated work in 2025 and changes in project mix.
Rod Larson: Unallocated expenses of $38 $9 million were in line with our guidance for the quarter and lower than the same period last year.
Rod Larson: Now I'll address our outlook for the fourth quarter of 2024 as compared to the third quarter of 2024.
Rod Larson: On a consolidated basis, we expect our fourth quarter 2020 for revenue to increase led by increases in manufactured products and LPG with adjusted EBITDA similar to that achieved in the third quarter of 2024.
Rod Larson: Our expectations for our fourth quarter 2024 operations by segment or <unk>.
Rod Larson: <unk>, we are projecting slightly lower revenue and operating profitability as compared to the third quarter 2024, we forecast a decline in row days utilized in drill support activities, which we anticipate will be partially offset by an increase in vessel support activities.
Rod Larson: Overall <unk> fleet utilization is expected to be in the upper 60% range.
Rod Larson: Our fourth quarter adjusted EBITDA margin is forecast to remain in the mid 30% range.
Speaker Change: For manufactured mix, we anticipate revenue to increase due to deliveries of our IMAX movie Counterbalanced Forklifts operating income and operating income margin is expected to be down significantly due to lower plant absorption related to holiday schedules and the delivery of Max movers at margins currently lower than those achieved in our energy businesses.
Speaker Change: <unk>, we anticipate increased revenue and significantly higher operating results with operating income margin in the low 20% range.
Speaker Change: This forecast is based on an improved project mix to include more installation and intervention services with.
Speaker Change: With multiple projects in West Africa commencing in the fourth quarter and the return to service of the vessel that underwent and I will add completed the previously mentioned crane repairs.
Speaker Change: For Mds following the divestiture of the Maritime Intelligence Division, we expect operating profitability to improve on lower revenue.
Speaker Change: For AD Tech, we expect lower revenue and significantly lower operating income with operating income margin in the low teens percentage range.
Speaker Change: Look at it based on delays in the timing of project schedules and awards and unallocated expenses are expected to be in the $40 million range for the fourth quarter of 2024.
Speaker Change: Sure.
Speaker Change: Full year of 2024 as reported yesterday, we expect to generate adjusted EBITDA within the revised range of $340 million to $350 million, our free cash flow guidance for the year remains unchanged in the range of $110 million to $150 million.
Speaker Change: Now looking forward I'd like to provide you with our initial thoughts on Oceaneering 2025 outlook.
Speaker Change: As announced yesterday, we are initiating 2025 EBITDA guidance in the range of $400 million to $430 million at the midpoint of $415 million. This would represent.
Speaker Change: Resent a 20% increase over the midpoint of our revised adjusted EBITDA guidance for 2024.
Speaker Change: We are confident in our ability to deliver this improvement in 2025 based on.
Speaker Change: Increased revenue and improved operating income across all of our operating segments led by notable gains from SSR manufactured products and not to be missed AD tech.
Speaker Change: For SSR, we project similar utilization levels, and RV, but improved revenue and further margin expansion on continued pricing momentum and efficiency gains in Aro and improved performance from surveying tooling.
Speaker Change: For manufactured products, we forecast increased throughput and conversion of higher margin manufactured products backlog and better performance in our non energy products businesses.
Speaker Change: <unk>, we expect increased international activity higher margin intervention and installation projects and no major vessel dry docks.
Speaker Change: Brian <unk> operating income is expected to be significantly higher due to improved commercial terms and not incurring a loss associated with the previously mentioned sale of the maritime intelligence business.
Speaker Change: For Amtech, we forecast significant growth in revenue and operating income on low to mid teens margins. Our outlook is based on a revised program schedules and commencement of New program Awards and unallocated expenses are expected to increase modestly in the range of $40 million to $45 million per quarter.
Speaker Change: With year over year increases due to planned implementation of a new ERP and other information technology costs.
Speaker Change: This level of performance in 2025 also underpins our expectation that our 2025 free cash flow will exceed that generated in 2024.
Speaker Change: In 2025, we expect capital expenditures to be modestly higher than 2024, because we foresee as.
Speaker Change: As we focus on growth in our various robotics platforms, and New York, New ERP and other opportunities generating the highest returns.
Speaker Change: I'd like to highlight that year over year.
Speaker Change: In 2025, we are projecting a significantly stronger first quarter.
This is based on our expectations that we will maintain our pricing and margin improvements achieved throughout 2024.
Speaker Change: Our <unk> results will improve significantly with the absence of a dry dock in 2025, yielding lower dry dock cost and improved vessel availability and OTG work commenced in the fourth quarter.
Speaker Change: Of 2024 will continue in the first quarter of 2025, we will provide more specific guidance on our expectations for 2025 during the year end reporting process.
Speaker Change: In summary, we believe we are well positioned to deliver our customers' needs in the foreseeable future. We continue to maintain and grow our market share in our core businesses and we're entering new markets by leveraging our robotics capabilities all of which are made possible by the relentless efforts of talented oceaneering around the globe.
Speaker Change: We appreciate everyone's continued interest in Oceaneering and will now be happy to answer any questions you may have.
Speaker Change: At this time, if you'd like to ask a question. Please press the star and <unk> on your telephone keypad keep in mind, you may remove yourself from the question queue at any time by pressing star and two.
Speaker Change: Again, it is star and if you'd like to ask a question today.
Speaker Change: We'll take our first question from Kurt <unk> with benchmark. Please go ahead. Your line is open.
Speaker Change: Hey, good morning, everybody.
Speaker Change: Good morning, Kurt.
Kurt: Hey, so.
Kurt: I'm glad you guys put the markers out there for 2025, given that theres been a lot of.
Kurt: Discussion around offshore drilling white space utilization and so on so obviously, you've you've incorporated.
Kurt: So the question would be.
Kurt: How much white space have you incorporated how did that white space potentially impact you.
Kurt: My my.
Speaker Change: I guess the grille just the question is my understanding is that you have a very significant share in the <unk> drillship market, but it seems like a lot of this potential.
Speaker Change: Downtime might be for <unk>. So.
Speaker Change: Kind of a broad question, but really wanted to get a little bit more context around how you're thinking about it.
Speaker Change: No I think he got it Kurt I mean, we're not seeing significant white space we did.
Speaker Change: We did talk a little bit about utilization and maybe some of the peak utilization. We are open for doesn't necessarily happen in the first part of the year, so, but even even with that I mean with the pricing improvements with the other things that are going on that are going the right way with cost control and efficiency turn on turn.
Speaker Change: <unk> is around it's still it still bodes for a really strong here I mean, SSR still deliver some of the best improvements year over year of any of our divisions. So I think that's the that's the short story vessels stay strong a better year for LPG needs a better year for SSR and we've also got more juice in both the tooling.
Speaker Change: In the survey side.
Speaker Change: Got it and then.
Speaker Change: Typically there is a correlation in a little bit of a lag effect between.
Speaker Change: The move in the day rate for the rig and then your pricing you did indicate.
Speaker Change: Do you expect to get better pricing.
Speaker Change: And maintain the pricing that you got through 2024 so.
Speaker Change: Is there a way you gave us a general sense of what kind of.
Speaker Change: Yes percentage pricing improvement year on year, you guys are factoring into your EBITDA guidance for SSR.
Speaker Change: I don't know that I could get that specific kirt, because it really depends on the region.
Speaker Change: We have rolling some contracts and some of the some of the better region. Some of the better pricing region. So as they roll.
Speaker Change: We'll move those prices up but it's hard for me to really pin a number on what that would be on the whole because it's going to depend on the utilization of those days in those regions.
Speaker Change: Got you and then.
Speaker Change: My follow up would be on manufactured products side.
Speaker Change: You guys are.
Speaker Change: Starting to deliver on on the.
Speaker Change: Automated forklifts and so on and just wanted to get an update on how that outsourcing process has been going it seems like it's going to be a little bit of a drag on margin in the near term, but how do you see that.
Speaker Change: Outsourcing agreement.
Speaker Change: Evolving and improving margins going forward.
Speaker Change: So I'll say this that the execution has been good meaning this handover between we've been we've been building these things in Orlando.
Speaker Change: And we've moved that to our outsource facility or outsource manufacturer.
Speaker Change: I think the handoff has been great. We've moved some inventory across we've done some things like that we built the first article.
Speaker Change: I think what the problem with the margins until we get them fully switched we're kind of paying for both sides right. So there's some redundant cost in the startup but it is.
Speaker Change: As those things resolve and.
Speaker Change: Alan I think you've mentioned this before is we start to build volume in that business, we get more vehicles out. So not only are you selling vehicles, but that whole razor and blades part when we get more of those razorblade sales on sparing and service and other thing on our installed base. That's when we expect this thing to really come to fruition.
Speaker Change: Yes.
Speaker Change: I may have missed it if you mentioned it during the early part of your commentary, but what was your order intake for the automated forklifts.
Speaker Change: Quarter.
Speaker Change: Yes, it wasn't in there Kurt.
Speaker Change: We've got that ready for public consumption anyways.
Speaker Change: Carla I would just say there were no large material orders for Maxim members during the quarter.
Speaker Change: Okay, Alright, that's great. Thank you.
Speaker Change: We'll take our next question from Sean Mitchell with Daniel Energy Partners. Please go ahead.
Sean Mitchell: Good morning, guys. Thanks for taking the question earlier. This month you guys put out a release highlighting you were awarded a multimillion dollar contract by the U S Department of defense to build.
Sean Mitchell: Thomas underwater vehicle and established an onshore remote operations center for the U S Navy.
Sean Mitchell: If you gained further traction here, how do you envision the total addressable market in the defense industry with something like <unk>.
Speaker Change: And then I think you noted that unit was being built in Morgan city when will that be delivered.
Speaker Change: So I'll start with the last question where we.
Speaker Change: We're set for Q2 25 delivery of the vehicles.
Speaker Change: So that's exciting.
Speaker Change: I could be tongue in cheek and I can tell you I can say I can tell you, but I'd have to kill you.
Speaker Change: Fence side, but.
Speaker Change: We really don't know I mean, it depends on what the use cases are for the government.
Sure.
Speaker Change: I'd say pretty bullish on it in the sense that you see all these articles that are out there right now talking about the use of drones more use of drones and more use of autonomy furthered by the military and how they think that's a real force multiplier. So so we're keen on it I think what will really tell us when they get this first article in their hands and they start working with it.
Speaker Change: And putting it through its paces and seeing.
Speaker Change: How many of the things they want to do are achieved.
Speaker Change: Shrink base and for US that's a huge opportunity because we do some of that work now, but but we've also been working really hard with the with the Oems to help them expand their capabilities. So that's another big one to watch.
Speaker Change: Got it. Thank you maybe one follow up just when you think about uses of Capex going forward for your for the company and 25 and beyond relative to kind of the approximately 120 million you'll spend this year, how should we think about not only the dollar amount, but the makeup do you push harder in autonomy and maybe you already have or how do we.
Speaker Change: Should we be thinking about capex.
Speaker Change: Let's start with the basics.
Speaker Change: One thing to note is that as we spend more money at a greater percentage is going to growth.
Speaker Change: And when we think about growth I don't think about more of the same rate I'm not thinking about doing more of the things. We finally got decent absorption on things like umbilical plants.
Speaker Change: And some of our other hardware.
Speaker Change: Out in the field, but I think we do we lean more on next generation things that are going to be differentiated things that will make us more competitive maybe even a little bit disruptive.
Speaker Change: Definitely where we want to spend money.
Speaker Change: Got it thanks for taking my questions guys.
Speaker Change: Yes, Thanks, Sean.
Speaker Change: Okay.
Speaker Change: And we'll take <unk>.
Speaker Change: As a reminder, if you'd like to ask a question today. Please press the star and one keys, we'll take our next question from David Smith with Pickering Energy Partners. Please go ahead. Your line is open.
David Smith: Hey, good morning, I just wanted to comment.
Speaker Change: Yes, that's our margin improvement.
Speaker Change: Really impressive.
David Smith: Given the limited increase in RF engineering, So I wanted to ask if it's fair to assume the average.
David Smith: Growing all of the Opex came down in Q3 also.
Speaker Change: Our segment margin really benefited more from on the tool and survey business.
Speaker Change: I think that I think a lot of it is the efficiency side and cost I mean, the other thing I can say is.
Speaker Change: Kind of.
Speaker Change: Harped on this a little bit, but I'll say it again, there is something good that happens when our utilization gets up and that I want to say that maybe the 65 to.
Speaker Change: And maybe if we even if we hit 80 the machine just runs better.
Speaker Change: See fewer <unk> events are or problems.
Speaker Change: Team is sort of in a rhythm.
Speaker Change: It does really run best its efficiency is best when we're when we're humming and we were just got everything moving along so I think that lack of lack of.
Speaker Change: <unk> operating efficiency.
Speaker Change: More days without mobilizations all of those things really do turn into lower Opex and better operating efficiency out in the field.
Speaker Change: Yes, I'll add rod.
Speaker Change: We are preparing the notes.
Speaker Change: Macdonald, our senior Vice President of subsea robotics emphasize the efficiency gains that we're making in RMB. So he wanted to make certain that it was clearly evident that it was not just tooling and survey.
Speaker Change: They are.
Speaker Change: When they have more data to work with you can just imagine theyre doing more predictive maintenance, they're looking at.
Speaker Change: Modeling failures and getting ahead of these things and understanding when the when the maintenance needs to be done based on the current operating profile.
Speaker Change: The turnaround on vehicles, even how long it takes for them when they get an RV and of the shop until they can get it service and then back out in the field all of those things their push on everybody.
Speaker Change: I like I've been using this.
Speaker Change: This analogy a lot internally, but I would tell him every everything is an F. One race every time, we come into the pits, we figure out how to take second half of next lap no matter, whether thats the driver time in pits, whatever and they've really taken it to heart.
Speaker Change: I appreciate that so it sounds like that the all of the margin improvement we've been seeing is really about the pricing improvement and efficiency gains.
Speaker Change: I did want to ask if you're still on <unk>.
Speaker Change: Combos until further tailwind.
Speaker Change: Initiatives like.
Speaker Change: Piloting right.
Speaker Change: Costs are maybe the performance contracting.
Speaker Change: Yes, and we do I mean, there's always more to get and I think it's like peeling the onion.
Speaker Change: You do find new things when as the farther you go so it doesn't it doesn't seem like we run out of opportunities.
Speaker Change: The other thing I mean, the remote piloting what we're seeing is the more satellite coverage, we get the more <unk> around the world we get the more opportunity. There is right now we can we can set up the operating centers anywhere in the world that's not a problem.
Speaker Change: The issue is really whether or not we can have five G to the rig so that we can get that low latency we need.
Speaker Change: Five year equivalent.
Speaker Change: To operate in Rovs remotely because of the lag time will be just too hard to operate the RV and in those places, where we can't get that sort of communication bandwidth.
Speaker Change: I appreciate the color, Okay, if I could slip one more in just circling back to John's question.
Speaker Change: Yes.
Speaker Change: Defense.
Speaker Change: <unk> business grows wanted to make sure that we should be thinking about that that's kind of a manufacturing sale that goes to.
Speaker Change: As opposed to growing the RFP account types and robotics.
Speaker Change: Yes, it would be it would be more on that side.
Speaker Change: We do but the other side I would just point out is a lot of the work that we do for the government with with government owned company operated so they call. It a go co where we would actually sell the equipment to the government they would own it but in a lot of times, we would operate some of that much like we operate those submarine rescue.
Speaker Change: Equipment package, we build some of that but now we're actually maintaining and operating that equipment on behalf of the government. So I think theres I think theres some opportunity on both sides.
Perfect. Thank you very much.
Speaker Change: You bet.
Speaker Change: And once again, if you'd like to ask a question. Please press the star and one keys.
Speaker Change: So we do have <unk>.
Speaker Change: Follow up question from Kurt <unk> with benchmark. Please go ahead.
Speaker Change: Hey, guys.
Speaker Change: So.
Speaker Change: You guys referenced you started the share repo program.
Speaker Change: Just wanted to get an update from you guys on how you are thinking about that dynamic.
Speaker Change: Yes.
Speaker Change: Considering the possibility to be more programmatic about it.
Speaker Change: Or are you still looking at it.
Speaker Change: Opportunistic.
Speaker Change: Part of it the second part was thinking a lot.
Speaker Change: Tim that you guys provided us with.
Speaker Change: Your point on capital allocation you didn't.
Speaker Change: Specifically to mid <unk> percentage of the cash flow that's going to go to the shareholder distributions. So I was just wondering if you kind of have reconsidered that and.
Speaker Change: Give us some updates on that.
Speaker Change: I'd put it this way Kurt.
Speaker Change: We were looking at current and future dilution. So we are we are at least saying that should be a goal to try to manage manage or eliminate dilution.
Speaker Change: Through our employee stock plan. So I think that's that's one way I would look at sort of the sizing it.
Speaker Change: <unk>.
Speaker Change: I think it is going to be somewhere between programmatic and opportunistic I think we want we don't want it to be every nine years, meaning the last time, we did the Swiss 2015, and we'll wait another nine years Thats not thats certainly not the case, but I think we're going to be we're going to be cautious because you mentioned the whole capital allocation thing, we do have a significant number of opportunities.
Speaker Change: We think are really on the growth side of the business. So we're going to we're going to stick with our guns. We've said it for a long time organic growth inorganic growth and then return of capital and so I think just just we'll stick to that but you also know that we've been fairly conservative with the with the investment too we're not just throwing money around.
Speaker Change: And we did tighten up a lot, especially during the during the downturn, but I don't I don't think theres going to be any urgency to go go back too.
Speaker Change: I don't know oceaneering was ever there, but as the industry got a little wild with spending money.
Speaker Change: Certainly not our plan Alan would you add anything.
Alan Curtis: No I think thats.
Alan Curtis: That's spot on Rod it is clear.
Alan Curtis: <unk>, we do have a little bit more in the pipeline today than we've seen in the last five years.
Alan Curtis: That are kind of fit into that propeller chart that we have in our investor deck that focuses on opportunities in the Mds.
Alan Curtis: Space things that are in the aerospace and defense side of the business and other mobile robotics. So.
Alan Curtis: I think we're clearly defined as to what we're looking for.
Alan Curtis: Yes.
Speaker Change: Excellent alright. Thanks.
Kurt: Thanks Kurt.
Kurt: Yes.
Speaker Change: And once again, if you do have a question please press star and one keys.
Speaker Change: Pause for another moment to allow any further questions to queue.
Speaker Change: And there are no further questions on the line at this time I'll return the program to Rod Larson for any additional or closing comments.
Rod Larson: Since there are no more questions I'm going to just wrap by thanking everyone for joining the call. This concludes our third quarter 2024 conference call have a great day everybody.
Speaker Change: This does conclude today's program. Thank you for your participation and you may now disconnect.
Rod Larson: Mhm.
Rod Larson: [music].
Rod Larson: Uh-huh.
Rod Larson: Yes.
Rod Larson: Oh.
Rod Larson: Yes.
Rod Larson: [music].
Rod Larson: Uh-huh.
Rod Larson: Okay.
Rod Larson: [music].
Rod Larson: Yes.