Q4 2024 Innovex International Inc Earnings Call

Speaker Change: Good morning and welcome to InnoVEX's fourth quarter and full year 2024 earnings call. At this time, all participants are in a listen-only mode and there will be a question and answer opportunity at the end of this call.

Speaker Change: As a reminder, this call is being recorded. Before we begin, I would like to turn the call over to Adam Anderson to say a few words.

Thank you and good morning.

Speaker Change: Regretfully, I need to start the call on a solid note. Patrick Connolly, Amberjack Partner, and InnoVEX Director passed away Monday night unexpectedly.

Speaker Change: Patrick was a father, a husband, a veteran, and our business partner. We worked with Patrick for a decade and he was one of the all-time great human beings I had the honor to be around. Anybody who knew Patrick would share that sentiment.

Speaker Change: He's everything a man aspires to be for himself or for his son.

And I will forever miss him.

Speaker Change: I ask everyone on the call to keep Patrick and his family in your thoughts and prayers.

Operator.

Speaker Change: Let's take a short moment of silence in Patrick's honor and then begin the pre-recorded part of the earnings call. Thank you.

Avinash Kadapa: I would now like to turn the call over to Avinash Kadapa, Senior Director of Investor Relations. Please go ahead.

Speaker Change: Thank you and good morning. We appreciate you joining us on today's call. An updated investor presentation has been posted under the investors tab on the company's website along with the earnings press release.

Speaker Change: This call is being recorded and a replay will be made available on the company's website following the call.

Speaker Change: Before we begin, I would like to remind you that InnoVEX's comments may include forward-looking statements and discuss non-GAAP financial measures. It should be noted that a variety of factors could cause InnoVEX's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements.

Speaker Change: Please refer to the Fourth Quarter 2024 Financial and Operational Results Announcement we released yesterday for a discussion of forward-looking statements and reconciliations of non-GAAP measures.

Speaker Change: Speaking on the call today from Innovex, we have Adam Anderson, Chief Executive Officer, and Kendall Reed, Chief Financial Officer. I would now like to turn the call over to Adam Anderson.

Speaker Change: Thanks, Avi, and thanks to everyone for joining us today. First off, I'm very pleased by the results of the quarter. We've made great progress across all our strategic initiatives, and none of it would have been possible without the efforts of our employees. We have an incredible team of people for which I'm very grateful.

Speaker Change: On today's call, I'll provide an overview of InnoVEX's overarching value proposition, discuss two recent acquisitions that fit our discipline framework, and give an update on our transformation of the combined business. Kendall will discuss financial results, capital allocation framework, and our outlook for Q1.

Speaker Change: Our vision is to create a unique, energy-focused, industrial platform that drives exceptional value and service for our customers and exceptional absolute returns for our shareholders.

Speaker Change: Since Innovex's inception in 2016, we've generated strong financial returns on capital employed, not just relative to traditional energy service companies, but returns superior to the S&P 500.

Speaker Change: To achieve these returns, we've curated a portfolio of what we call small-ticket, big-impact products, employing a capitalized business model.

Speaker Change: Our portfolio has been curated to focus on technology-enabled consumable products and high-margin rental technologies.

Speaker Change: Given the nature of our product set and our lean operating model, InnoVEX has historically required a negligible amount of CapEx to sustain and grow our business.

Speaker Change: Consequently, under normal business conditions, we convert somewhere from 50% to 60% of our EBITDA into free cash flow, which allows us to fund organic and inorganic investment opportunities, targeting returns in excess of 20%.

Speaker Change: To drive innovation and organic growth, our No Barriers culture is paramount. No Barriers means eliminating all the barriers between ourselves and our customers, as well as within our company, to ensure that we're elevating the experience for everyone.

Speaker Change: Our culture drives innovation and customer loyalty, as evidenced by continued gains in market share.

Speaker Change: According to the independent oil field research firm Kimberlite, market share in our cementing tool product line in U.S. land has consistently expanded over the last five years, increasing another 100 basis points in 2024 to 28 percent.

Speaker Change: The InnoVEX platform also positions us well for inorganic growth opportunities. We leverage the strength of our platform when we evaluate potential targets. Additionally, any business must fit our small ticket, big impact value proposition.

Speaker Change: The combined entity must generate exceptional gross margins, consistent EBITDA margins, and high free cash flow.

Speaker Change: At a time when our industry is struggling for investor relevancy, we believe that the best way to be relevant is to be highly profitable.

Speaker Change: A core tenet we have is to maintain a strong balance sheet to enable us to weather potential storms in our industry, and more importantly, allow us to be aggressive when times get tough. We will always maintain leverage at less than one turn of death to EBITDA.

Speaker Change: The recent acquisition of Downhole Well Solutions is a great example of our framework in action.

Speaker Change: DWS is the leading provider of proprietary drilling optimization and friction reduction tools that are rented to operators in multiple U.S. land markets. At the time of acquisition, DWS products operated on 38% of all U.S. land rigs.

Speaker Change: DWS's commitment to customer satisfaction coupled with the superior performance of their tools has established them as the premier provider of downhole drilling optimization tools.

Speaker Change: The business fits our acquisition model, as DWS operated a capital-wide, high-margin business which generated strong free cash flow and robust ROCE.

Speaker Change: We initially purchased 20% of DWS in May of 2023, and during our time as a minority owner, it was apparent that DWS had established a culture that is an excellent fit with ours.

Speaker Change: A strong culture and a compelling product proposition has allowed them to significantly increase their market share while maintaining disciplined pricing.

Speaker Change: Additionally, DWS brings revenue synergy opportunities as we serve the exact same users within our client organizations.

Speaker Change: In the U.S., DWS has a tremendous relationship with several key customers where Innovex is currently underrepresented, and we plan to leverage this to help grow many of the Innovex products in the U.S. market.

Speaker Change: International markets present an untapped opportunity for the DWS product suite. We estimate the addressable market for international opportunities to be at least one-third of the U.S. market and growing quickly as customers drill more complex wells.

Speaker Change: We've generated some early success in Canada, Latin America, and the Middle East, but expect much more significant growth going forward.

Speaker Change: Another example of reinvesting our pre-cash flow to strengthen our business is the acquisition of SCF Machining Corporation during February.

Speaker Change: SCF is a machine shop based in Vietnam, which we partnered with in 2023 as a means for Inovex to gain access to high-quality, low-cost manufacturing. We've been pleased by the performance of this facility and the potential to expand the capabilities and overall output of the plant.

Speaker Change: Owning SCF will allow us to improve on our product's already strong gross margins and better service our growing operations, particularly in international markets.

Speaker Change: Both of these acquisitions share a few common traits. They are immediately accretive, help us strategically grow our business, and we were able to fund both from free cash flow in a way that maintained a conservative balance sheet.

Speaker Change: In addition to utilizing our free cash flow to fund inorganic growth opportunities, I'm excited about our board's recent authorization of a share repurchase program. This will provide us with a competing use of capital and give us a new avenue for shareholder returns.

Speaker Change: I would now like to give an update on our integration and transformation of the Legacy DrillQuit business.

Speaker Change: What was apparent to us during the early stages of our conversation with DroQuip, and has only become clear since we closed the merger, is that DroQuip has a wonderful team of people and technologies.

Speaker Change: What DrillQuip brings to the combined company is not easily replicated, especially in the high-performance offshore and international markets. There's a high barrier to entry and high cost of change for our customers in these markets.

Speaker Change: One recent example of this is the first successful run of an 18-inch by 22-inch X-PAC liner hanger system, a legacy drill clip product for a major international operator in the Gulf of Mexico.

Speaker Change: The innovation and execution of this project allows us to tap into a new market which is a high barrier to entry and few competitors.

Speaker Change: Further, we were able to integrate InnoVEX centralizers with the XPAC system on this well. The total value of this well for InnoVEX was roughly $2 million, and we think there are at least 50 wells drilled annually that could benefit from this solution.

Speaker Change: As discussed in our previous call, a significant focus for our team has been driving cash flow and returns that match the unique value proposition that legacy drill clip technologies deliver for our clients.

Speaker Change: The infrastructure and operating model for the company was inefficient, designed for a pre-2014 offshore market environment.

Speaker Change: Neither the cost structure nor processes were sufficiently right-sized to match a significantly smaller market. Among other impacts, this has led to a facility footprint which is inefficient and expensive to operate.

Speaker Change: One example of how we are swiftly moving to right-size the business is the recent announcement that we plan to divest the Droquip Eldridge facility in Houston.

Speaker Change: Many critical functions such as engineering, manufacturing, and field service are currently performed at this facility. Some of these functions will be consolidated into existing facilities, and some of these functions will be moved into a newly leased facility, which is more efficient and fit for purpose.

Speaker Change: This transition will enable us to generate cash from the facility sale, shrink our monthly expenses, but most importantly, it will enable us to have a much leaner footprint, improving our service delivery to the customer.

Speaker Change: We expect the net result of these changes to be an approximate 82% reduction in the operating footprint and a significant improvement in service quality.

Speaker Change: Our number one priority is building customer relationships which revolve around trust.

Speaker Change: Our customers expect us to deliver high quality products in a timely and predictable fashion.

Speaker Change: Historically, DrillClips' on-time delivery rate was unacceptable in the eyes of our customers.

Speaker Change: This impacted DrillQlip's ability to grow market share, margins, and free cash flow. We are moving quick to improve the operating model in numerous ways to address these concerns. A great example of this is DrillQlip's ERP system, which is cumbersome to operate and was not installed across all geographies.

Speaker Change: We have implemented the Innovex ERP system in the U.S. and plan to do so across all locations by the end of 2025. One tangible benefit will be reducing the number of steps to go from customer PO to internal order by approximately 80%, significantly improving our turnaround times.

Speaker Change: As with many changes of this magnitude, this process will not be simple and may result in short-term challenges, but we firmly believe the end result will be significantly better for our company and our customers.

Speaker Change: We have already begun to see some fruits of this labor and have been able to improve on on-time deliveries.

Speaker Change: We estimate that it will take several quarters to work through the existing backlog of orders, which will keep our on-time delivery below our target. However, as new orders flow through our books, we will see the on-time delivery of subsidy products improve, with the target of ultimately achieving greater than 95 percent.

Speaker Change: Lastly, we're pleased to announce our newly enhanced alliance with 1SubC. This alliance enables us to supply 1SubC with NFX wellheads for ETCI or bundled contracts, increasing our addressable market for 1SubC wellheads.

Speaker Change: The Inovec's one subsea relationship has already had success, as evidenced by a recent subsea wellhead order in Asia Pacific for six wellheads to be delivered in 2025.

Speaker Change: Overall, I am pleased by the progress and execution of our transformation, which will provide significant value to our employees, customers, and shareholders. I would like to thank our employees for all of their contributions and look forward to our continued success going forward. I will now hand the call over to Kendall.

Kendall Reed: Thanks, Adam, and good morning, everyone. I'm excited to discuss our first full quarter of combined financial results following the NFX-Droquip merger. As a reminder, we closed on the merger with Droquip on September 6, 2024, meaning that Droquip had limited impact on our Q3 results while contributing fully to our fourth quarter numbers.

Kendall Reed: Innovex was the accounting acquirer in the merger with Drukwit, so historical comparative periods prior to Q3 2024 reflect legacy Innovex standalone results. In addition, we closed the acquisition of DWS on November 29, 2024, so Q4 results include one month of DWS performance.

Kendall Reed: Finally, our Q4 numbers reflect only partial realization of our merger synergies with DrillClip, that those cost savings were phased in over the course of the quarter.

Kendall Reed: In summary, we are pleased that our Q4 results are beginning to demonstrate the earnings power of our platform, with further margin enhancement opportunities in 2025 as drill quick synergies are fully realized and the DWS business is fully integrated.

Kendall Reed: Our full year 2024 revenue was $661 million, an increase of 19% year-over-year, primarily driven by the merger with TrollQuip.

Kendall Reed: Fourth quarter revenue was $251 million, which is an increase of 89% year-over-year and 65% sequentially. The increase is driven primarily by the impact of the Droquip and DWS acquisitions.

Kendall Reed: As a reminder, we evaluate our revenue geographically by separating our shorter cycle onshore U.S. and Canadian operations, which we refer to as NAM lands, from our longer cycle international and offshore operations, which include offshore U.S.

Kendall Reed: Our Q4 NAM land revenue of $103 million increased 5% as compared to Q3 revenue of $98 million, primarily as a result of the DROQIP and DWS acquisitions.

Kendall Reed: On a pro forma basis, our 2024 NAM land revenue was approximately $491 million, a decrease of 6% as compared to approximately $522 million in 2023, given the 13% decline in U.S. land rig count over this same period.

Kendall Reed: Our international and offshore revenue during the fourth quarter of 2024 was $148 million, an increase of 176% sequentially, reflecting a full quarter of combined InnoVEX DROQIP results.

Kendall Reed: On a pro-forma basis, 2024 international and offshore revenue of approximately $548 million declined 5% from approximately $577 million in 2023, primarily due to a slowdown in the legacy drill-equip business.

Kendall Reed: As Adam discussed, we're enacting our transformation plan to reinvigorate sales and improve the customer experience.

Kendall Reed: While we're pleased with our Q4 top-line results, we evaluate our performance based on margins, free cash flow, and ROCE, all of which showed good progress during the quarter.

Kendall Reed: SG&A is a percentage of revenue decreased from approximately 25% in Q3 to 15% in Q4, a level more in line with Inovex's historical cost structure.

Kendall Reed: On our last call, we announced that we had met our Year 1 goal of $15 million in annualized savings as a result of the Enovex DrillQuit merger.

Kendall Reed: This is a testament to our team's ability to handle a complex integration while quickly reducing costs to deliver value for shareholders.

Kendall Reed: Strong execution on synergies drove an increase in EBITDA margin sequentially from 18% in Q3 to 20% in Q4. As a reminder, our realized cost synergies will phase in over time, partially impacting Q4 and Q1, and fully impacting Q2.

Kendall Reed: We continue to identify opportunities for cost savings and margin enhancements and believe that in the long run, the combined InnoVEX platform is capable of generating EBITDA margins of 25% or greater, in line with legacy InnoVEX results.

Kendall Reed: Adjusted EBITDA for the fourth quarter of 2024 was approximately 49 million, an increase of approximately 22 million sequentially and 17 million year-over-year, primarily driven by one full quarter of consolidated financials post-merger as well as the partial impact of cost synergies just discussed.

Kendall Reed: Free cash flow for the fourth quarter of 2024 was $29 million, a sequential increase of $9 million, primarily due to improved operating performance during the quarter and the non-recurrence of merger-related transaction fees.

Kendall Reed: Capital expenditures in the fourth quarter of 2024 were $8 million, and our full-year 2024 CapEx was $14 million, representing approximately 3% and 2% of revenue respectively, consistent with our capital-light business model.

Kendall Reed: It is worth noting that we expect our near-term CapEx to be on the high end of Inovex's historical average of 2-3% of revenue as we work through merger integration, including facility moves and consolidation in preparation for the sale of Eldridge, which we expect to bring in significantly more cash than any incremental required CapEx.

Kendall Reed: Our balance sheet continues to be extremely strong, with year-end total debt of $35 million, representing a debt-to-trailing 12-month adjusted EBITDA ratio of 0.26 times, more than offset by $73 million of cash-in-equivalence, resulting in approximately $38 million of net cash-in-equivalence at year-end.

Kendall Reed: Our return on capital employed, or ROCE, for the 12 months ended December 31st, 2024 was 12%, as compared to 9% for the 12 months ended September 30th, 2024.

Kendall Reed: Turning to our guidance for the first quarter of 2025, we expect adjusted EBITDA of $45 to $50 million on revenues of $245 to $255 million.

Kendall Reed: To wrap up the discussion on operating results, I would like to highlight two additional aspects of our transformational strategy for the Drogquip business.

Kendall Reed: Over the near term, we're focused on opportunities to improve operational performance, cash flow, and returns via facility footprint reduction and improved working capital management. Let me take each of those in turn.

Speaker Change: As Adam mentioned, we recently made the decision to divest DrillQuip's Eldridge facility. The facility is currently on the market and is generating significant interest from multiple parties, and we aim to close on the sale this year.

Kendall Reed: Not only will the sale add a significant amount of cash to the balance sheet and help improve our returns on capital, but it will also allow us to further improve our customer service and drive margin expansion as we consolidate these operations into a more efficient facility footprint.

Kendall Reed: Another area of focus for our team is reducing working capital and shortening cash conversion cycles, which we believe will improve corporate returns while also improving the customer experience.

Kendall Reed: Streamlined systems and processes will both reduce working capital while also addressing key customer pain points including on-time delivery and timely invoicing in line with our no barriers approach to customer engagement.

Kendall Reed: As a result of these efforts and strong execution from our team, our day sales outstanding decreased on a pro forma basis from 89 in Q3 to 83 in Q4, nearly in line with legacy NFX performance.

Kendall Reed: In recent years, we have primarily allocated capital toward M&A due to the attractiveness of the opportunity set to acquire businesses that fit our qualitative investment criteria and have the potential to generate ROCE above our corporate average, often in excess of 20%.

Kendall Reed: Adam discussed at length the acquisition of DWS, which is an excellent example of a creative M&A which fits within our framework.

Kendall Reed: We were able to acquire DWS at an attractive multiple of 3.8 times LTM adjusted EBITDA, and the transaction was 13% accretive to earnings per share based on LTM performance.

Kendall Reed: We are excited about the prospects for growth of the DWS business, both domestically and internationally, as well as the returns this acquisition will bring to our investors.

Kendall Reed: While we have focused heavily on successfully acquiring and integrating great companies in recent years, we are committed to remaining flexible and returning capital to shareholders when the time is right.

Kendall Reed: In line with this strategy, I am pleased that our Board of Directors has authorized a $100 million dollar share repurchase program, giving us the flexibility to deploy capital to the highest return opportunities as our market evolves.

I will now turn the call back to Adam.

Kendall Reed: Thanks Kendall. This was a remarkable quarter. We achieved our first year synergy target and our largest acquisition to date in the first few months after close. While achieving early wins with DrillQuip, we were still able to close on an exciting accretive acquisition.

Kendall Reed: We took a significant step to improving margins, returns, and customer experience with the announced plan to sell the Eldridge facility. We've launched a share buyback program providing us with a new means of returning capital to shareholders which will compete with our inorganic and organic investment opportunities and help us maximize ROCE.

Kendall Reed: We've maintained a net cash balance sheet and continue to expand our addressable market. We're very excited about what we've already achieved and look forward to sharing more with you as the year unfolds.

Kendall Reed: We'd like to now open the call for any questions. Operator?

Kendall Reed: If you would like to ask a question, please press star followed by the number one on your telephone keypad to withdraw any questions Please press star one again

Speaker Change: Our first question comes from David Smith from Pickering Energy Partners. Please go ahead, your line is open.

David Smith: Hey, good morning and thank you for taking the call. First, I just wanted to offer my sincere condolences for the loss of Patrick. That was tragic to hear.

Thank you.

My question is a little bit long, but...

David Smith: If I think about the history of Innovex, there's a long track record of new technology development organically.

David Smith: also a really good track record of identifying and acquiring promising technology like the DWS acquisition.

David Smith: Legacy Drill Quip was well regarded for its engineering and product innovation.

Speaker Change: And I hope it isn't too early to ask, but with the combined product offering and R&D efforts, I'm curious if there are any potential new technologies that stand out and get you excited about future commercialization opportunities.

Yeah, thanks, Dave, and I would agree with...

Speaker Change: Everything you said there. Yeah, I think we're really excited. I mean one of the Opportunities we described on the call is this integration of the legacy drill clip Expandable liner hanger where they've really got a better

Speaker Change: We're really able to, in that specific example and some other kind of similar casing string sizes, really provide a unique solution where we can provide something much more fit-for-purpose, we can save the customer rig time, fluid loss expense.

Speaker Change: and do it all at a, you know, an attractive price point for them and in a margin that's, you know, excellent for us. So that one stands out first and foremost as the nearest term one.

Speaker Change: changes to the wellhead, to the fabrication of the wellhead, to the casing connectors, to the liner hanger, to the centralizer float equipment, and some other specialty tools, and we're really the only folks that can bring all of that together. Now an opportunity like that is going to take a couple of years to unfold because all of these deepwater operations, as you know, are highly engineered and thought through, so it's going to take a little bit of time to evolve.

Speaker Change: But I think there's a lot of opportunities like that in the deep water market that we're just starting to kind of scratch the surface of.

No, it's great to hear. I appreciate the call there.

Speaker Change: And my follow-up, if I may, just regarding the potential sale of the...

the target sale of the Eldridge facilities.

Speaker Change: Are you able to share, you know, any color on the range of potential proceeds you would expect from selling the campus?

Speaker Change: And if not, is there any reason we shouldn't consider the prior two carve-outs from that campus as good indicators on a dollar per acre range?

Speaker Change: Yeah, no, it's an important question. So We are looking to exit that entire campus just to give people a sense We do have a very competitive process ongoing as I mentioned on the call So I think given that dynamic that we're actively in the market right now with the number of interested buyers I don't want to comment too specifically on valuation, but

Speaker Change: I will say that given the level of interest we're receiving, we're very optimistic that we'll be able to complete the sale this year at an attractive valuation.

Speaker Change: Well, thank you for taking my questions. I'll turn it back.

Thanks, Dave.

Speaker Change: As a reminder, to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from Eddie Kim from Barclays. Please go ahead. Your line is open.

Eddie Kim: Hi, good morning. I wanted to start off asking about your guidance for the first quarter, which is more or less flat quarter, quarter over quarter.

which is somewhat counter to that.

Eddie Kim: decline we usually see across the industry from 4Q to 1Q. Is that mostly

Eddie Kim: Just due to a full quarter contribution from DWS, or is it a function of perhaps a better outlook that?

that sort of bucks the seasonal trend.

Just any thoughts there.

there would be great.

Eddie Kim: Yeah, thanks, Eddie, and thanks for joining the call. Yes, you're right, we are going to benefit from two additional months of impact from DWS in Q1 2025 versus Q4. And then that's going to be offset by a little bit of the seasonal weakness that you...

that you talked about there.

Got it. Got it. Thanks for that clarification.

Speaker Change: So, I didn't see full year 2025 guidance in your slide deck, but I'm going to give it a shot. If I just take your first quarter, you've got a guide.

Speaker Change: then assume kind of a seasonal rebound in second quarter, third quarter, and maybe a bit of a drop off in 4Q. I'm getting to roughly 200 million in adjusted EBITDA for the full year. Is that

Speaker Change: in the ballpark of how you're looking at the year progressing or are there certain things I should be taking into account that I'm not thinking about? Just any thoughts there or how you see the year progressing would be great.

Yeah, no, fair enough. So I think just from a

Speaker Change: we're not planning to give full year guidance. I think one of the key things about our business is we run a very flexible business model, which has

Speaker Change: A lot of benefits of our customers choosing to work with us every day and not a lot of locked in long term pricing allows us to stay very flexible, especially given some of the uncertainties we see in the market right now. I think that's a benefit, but.

Speaker Change: It does mean we tend to focus more on quarter ahead guidance for these types of discussions, but I think that being said

Speaker Change: Nothing major that we see that would say that's not in the ballpark. Although we are, as you know, continually in the market evaluating potential exciting acquisitions and things like that. So there certainly could be things that change.

Understood, understood, and fair enough.

Speaker Change: If I could just squeeze one more in here, the follow-up is just on the MSA you just announced with 1 sub-C on sub-C wellheads.

Speaker Change: Could you just expand upon what's new here with this MSA? And going forward, I mean, is it fair to assume that all, or at least most, of one subsea's development projects will likely utilize your subsea wellheads? Just any thoughts there.

Yeah, so we're really excited about the OneSubsea partnership.

Speaker Change: I would say this is an evolution. Yes, there's been a loose partnership for some time, but we received the first concrete orders from them that I referenced in this Asia-Pac project, and then I would expect a couple of more similar size awards to happen in the first half of this year. So I think we're seeing a lot more traction with it. So this is a little bit more of a formalization of the good work that's been in progress for a while.

Speaker Change: Longer term I would say I am I think it's incumbent on Innovex to do a great job for one sub C so that we can continue to grow that. We've got some great technology, we've got great people.

Speaker Change: as we improve our deliveries, continue to service 1 sub C well, I would hope to see that expand pretty substantially, but it's still early days on that.

Got it. Great. Thanks very much. I'll turn it back.

Thanks, Eddie.

Speaker Change: Our next question comes from Arvind Sanger from Geosphere Capital. Please go ahead, your line is open.

Arvind Sanger: Thanks, good morning, great quarter guys. Just a couple of quick follow-ups. One is, you know, with this Eldridge facility potential sale happening later this year and whatever you're doing to consolidate, are there additional synergies that might come come through or...

are in other ways...

Arvind Sanger: are all the synergies that you had hoped to squeeze out of the drill quip merger and acquisition. Is that all done by now?

Arvind Sanger: You know, that is definitely a potential upside as we move forward here. A key reason we've been able to achieve the 30 million target much faster than expected is that a lot of those savings to date have really focused on SG&A overhead.

Arvind Sanger: So, as we get into some of these things that are longer lead time, like facility consolidation and streamlining the operations along that, we do expect there to be additional savings and that will be really a key step to helping us achieve that long-term EBITDA margin target of 25% that we sketched out on the call.

Arvind Sanger: Yeah, I think the benefit of the buyback is it really gives us the flexibility to evaluate, you know, M&A opportunities versus the buyback in terms of what's going to drive the best return. So we'll pay attention to valuation and liquidity in the stock, maintain good flexibility in how we're deploying capital, and really just evaluate that versus the opportunities that we have on the M&A side. So really looking to stay flexible, but really allocate capital to where it's going to drive the best returns for shareholders.

Speaker Change: So the buyback is going to be spread out, or how are you thinking about the buyback itself, kind of?

Speaker Change: Yeah, it'll be spread out. I don't think we're going to give any specific guidance around timing of deploying the dollars, but it'll be spread out.

Okay, great. Thank you.

[music]