Earnings Call Transcript - DXPE Q2 2023

Operator, Operator

Good morning, ladies and gentlemen. Thank you for standing by. My name is Erica, and I will be the conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises, Inc. 2023 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I now turn the call over to Kent Yee, CFO.

Kent Yee, CFO

Thank you, Erica, and thank you to everyone for joining us today. This is Kent Yee, and welcome to DXP's Q2 2023 conference call to discuss our results for the second quarter ending June 30, 2023. Joining me today is our Chairman and CEO, David Little. Before we get started, I want to remind you that today's call is being webcast and recorded and includes forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. A number of factors that we believe may have a material effect on our business on an ongoing basis are contained in our SEC filings. However, DXP assumes no obligation to update that information as a result of new information or future events. During this call, we may present both GAAP and Non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release. The press release and an accompanying investor presentation are now available on our website at ir.dxpe.com. I will now turn the call over to David Little, our Chairman and CEO, to provide his thoughts and a summary of our second quarter performance and financial results.

David Little, Chairman and CEO

Good morning and thank you, Kent. Thanks to everyone for joining us today on our fiscal 2023 second quarter conference call. We are pleased to see end market demand and DXP's performance continue through Q2 and remain at record levels through the first half of 2023. This allows us to achieve another quarter of both solid sales growth and 10% EBITDA margins. Overall, we had a great second quarter and strong first half of 2023. We are establishing new highs for DXP and look forward to the second half of 2023. The first half of 2023 highlighted solid execution and continued positive demand trends supported by our ability to grow organically and navigate the dynamic supply chain and pricing environment. We continue to execute our acquisition strategy to continue to grow our DXP water and wastewater platform, adding Florida Valve and Riordan Materials during the quarter. We continue to execute on our goals to diversify DXP's business while maintaining our commitment to foundational end markets like energy that have been and will always be a part of DXP. This is DXP's second quarter of adjusted EBITDA margins in excess of 10%, which is great to see, and we look forward to maintaining this profitability momentum. This speaks to our relentless drive. We have to center our strategy around our customers, remain customer-driven experts, while creating a win-win for all our stakeholders. We remain highly focused on providing the expertise our customers have come to expect from DXP by providing more efficient solutions, reducing costs, and achieving their ESG objectives. This consistent approach has fueled our financial results. Second quarter adjusted EBITDA of $45.3 million and diluted earnings per share of $1.06 was supported by year-over-year sales growth of 16.4%. Thanks to our efforts of all our DXP people across the company, we continue to grow and further our positive momentum, driving further operational improvements while performing for our customers. Our key end markets continue to perform for DXP and potentially have secular trends that we are just beginning to see including energy, power, chemicals, and aerospace. I personally want to thank all our DXP stakeholders, in particular all our DXPeople for their determination and hard work as we continue to grow and improve the business and achieve new sales highs for our business. As we move into the second half of the year, we remain confident that our well-balanced business, strong balance sheet, exceptional teams, improved capabilities, and robust acquisition pipeline position us well to navigate the current environment and achieve continued success. I will begin today, with some perspective on our second quarter and thoughts on the remainder of 2023. Kent will then take you through the key financial results after my remarks. After his prepared comments, we will open for Q&A. Again, let me thank our DXP stakeholders, in particular our DXPeople for their continued efforts and adaptability as we grow and evolve DXP into a more diversified and less cyclical business. Total DXP sales for Q2 increased 16.4% year-over-year and 1% sequentially or were $428 million or an average of $6.8 million per business day for the second quarter. Thank you to the 2,757 DXPeople for your hard work and dedication. In terms of Q2 financial results, service centers led the way, growing sales 18.85% year-over-year followed by Supply Chain Services growing sales 12.29% and then innovative pumping solutions, growing sales 9.78% year-over-year. In terms of service centers, the diversity of end markets and MRO nature within service centers allowed us to continue to remain resilient, and continue to experience consistent top line growth. Additionally, our Cisco acquisition continues to perform as we closed out the fiscal year of Cisco being with DXP. From my regional perspective, a majority of our regions continue to experience year-over-year growth, including the Rocky Mountains, Southeast, and Texas Gulf Coast. We continue to expect that our end markets will remain constructive over the foreseeable future. As it pertains to energy, we believe we could be in the early stages of an up cycle supported by energy transition, which has been consistent with our recent commentary over the last three quarters. Supply Chain Services continues to experience year-over-year growth due to the addition of a new diversified chemical customer during Q2 and Q3 of last year. As we move into Q3, we will look for new customer additions as we manage procuring products and managing inflation; both year-over-year and sequential growth will flatten out until we start ramping new customers. That said, demand for SCS services is increasing because of the proven technology and efficiencies they perform for all their industrial customers. But the sales cycle can be protracted, and we will look to our SCS leaders to add new customers as we move into 2024. In terms of IPS or Innovative Pumping Solutions, our Q2 average IPS backlog continues to stay ahead of the fiscal 2022 average. Additionally, our year-to-date average for the first time started to exceed our long-term average for our IPS backlog going back to 2015. What this indicates is that we are continuing to give bookings as we mentioned earlier, and we are likely in the front end of a good cycle on the energy-related project work and we look forward to as we move through 2023. As we maintain growth, our main focus within IPS will be managing the demand levels we have, finding opportunities in all markets such as energy, biofuels, food and beverage, and water and wastewater while pricing appropriately given the supply chain dynamics and ebbs and flows of inflation. DXP's overall gross profit margins for the quarter were 30.8% and sequentially a 133 basis point improvement over Q1 and 245 basis point improvement over Q2 of last year. A special thanks to our DXPeople who have stayed on top of supplier product increases, labor costs, and overall efficiencies. Overall, DXP produced adjusted EBITDA of $45.3 million, and adjusted EBITDA as a percent of sales of 10.6%, which reflects the operating leverage we expect to gain with significant sales growth. This also marks our second sequential quarter of 10% plus EBITDA margins, and we will look for this to continue as we move through the second half of 2023. Regarding capital allocations, we continue to make investments to fuel growth and diversify DXP through acquisitions while opportunistically repurchasing shares. By balancing these two approaches, we are pursuing both, driving long-term value for our customers and shareholders. We are continuing to return value to our shareholders through our $85 million share repurchase program. During the quarter, we purchased 749,000 shares amounting to $23.957 million. Let me conclude my remarks by saying that I am encouraged by our continued sequential improvement in sales and profitability. We continue to make progress on growth strategies, and our commitment to customers is stronger than ever. We are driving growth and improvements at DXP and we look forward to navigating and working through the remainder of fiscal 2023. Finally, I would like to thank our DXPeople for achieving our goal of 10, 10, and 10 again, and we aim to keep the streak alive. Q2 was another great quarter as we continue to have a successful year in 2023. With that, I will now turn this back over to Kent, and he will review the financials in more detail.

Kent Yee, CFO

Thank you, David, and thank you to everyone for joining us for our review of our second quarter 2023 financial results. The first half of 2023 continues to highlight our strong year-over-year sales performance and two quarters of 10% plus adjusted EBITDA margins. We are excited to report these results and we look forward to the second half of 2023. Specifically, Q2 financial performance reflects our 11th quarter of sequential sales increases and another record high sales watermark for DXP. DXP continues to successfully navigate through the market and has been able to execute and create value for all our stakeholders. We have been successful in transforming and diversifying DXP, but we still have progress to make. As it pertains to our second quarter, Q2 takeaways are as follows: strong organic sales growth and contribution from acquisitions, continued impacts from inflation or price increases compared to a year ago albeit at a slower pace, continued record service center performance marked by gross margin strength and stability, notable year-over-year and sequential growth in IPS with a positive outlook in terms of our backlog and energy activity, strong sales increases within SES driven by the addition of a large diversified chemical customer compared to a year ago, although plateauing during Q2, consistent operating leverage leading to sustained adjusted EBITDA margins, and significant capital return to shareholders through our share repurchase program. Total sales for the second quarter increased 16.4% year-over-year and 0.9% sequentially to a record $428 million. Acquisitions that have been with DXP for less than a year contributed $7.3 million in sales during the quarter. Average daily sales for the second quarter were $6.8 million per day versus $6.6 million per day in Q1 2023 and $5.8 million per day in Q2 2022. Adjusting for acquisitions, average daily sales were $6.7 million per day for the second quarter. That said, the average daily sales trends during the quarter went from $6.65 million per day in April to $6.9 million per day in June reflecting a typical quarter-end push as we closed out the second quarter. In terms of our business segments, Service Centers grew 18.9% year-over-year. This was followed by Supply Chain Services growing 12.3% year-over-year and Innovative Pumping Solutions growing sales 9.8% year-over-year. Excluding acquisitions, Service Centers grew 18.85%, our sales increased $47.3 million, while Innovative Pumping Solutions sales increased 9.78% or sales increased $5.65 million. In terms of our Service Centers, regions within the Service Center business segment, which experienced notable sales growth year-over-year include the Lyo River Valley, North Rockies, Texas Gulf Coast, and the Southeast. Key products and end markets driving the sales performance include air compressors, rotating equipment, and general industrial, chemical, food and beverage, transportation, and energy. Supply Chain Services performance continues to reflect the impact of the addition of a large diversified chemical customer that we added in Q2 of last year and has fully ramped as of Q2 this year. This customer contributed $15.9 million in sales during the quarter. Other notable gains from an end-market perspective within SES include growth within our energy and food and beverage customers compared to a year ago. In terms of Innovative Pumping Solutions, we continue to experience increases in the energy-related backlog. Our Q2 energy-related average backlog grew 6.5% over our Q1 average backlog, which is a notable uptick compared to Q1 of this year and continues to be ahead of our 2016 and 2017 average backlog and now is only down 1.5% when comparing to the 2015 average backlog. The conclusion continues to remain that we are trending meaningfully above 2016 and 2017 sales levels and we are moving towards 2015 levels based upon where our backlog stands today. We have been experiencing strong organic sales growth within IPS as we mentioned in Q1; we expect that to continue throughout 2023. Additionally, we are also continuing to find opportunities in other markets such as biofuels, hydrogen, carbon capture and sequestration versus our traditional oil and gas, but we expect energy to contribute meaningfully going forward. Turning to our gross margins. DXP's total gross margins were 30.8%, 245 basis point improvement over Q2 2022. This improvement was across all of our business segments with IPS showing the greatest improvement with margins improving 481 basis points on a year-over-year comparative basis. That said from a segment mix sales contribution, Service Centers contributed 69.7%, Supply Chain Services 15.5%, and Innovative Pumping Solutions was 14.8% compared to last year SCS sales mix contribution was higher at 16% which impacted DXP's margins in Q2 of 2022. In terms of operating income combined all three business segments increased 143 basis points or $13.7 million year-over-year business segment operating income versus Q2 2022. This was primarily driven by improvements in operating income margins within Service Centers and IPS. Service Center operating income margins improved 190 basis points, and IPS operating income margins improved 94% on a Q2 comparative basis year-over-year. The improvement in service centers reflects the impact of acquisitions at a higher relative operating income margin. Total DXP operating income increased 17 basis points versus Q2 2022 to $37.5 million. Our SG&A for the quarter increased $16 million from Q2 2022 to $94.4 million. The increase reflects the growth in the business and associated incentive compensation as well as DXP investing in its people through merit and pay raises as well as increased headcount. SG&A as a percentage of sales increased 75 basis points year-over-year to 22.1% of sales. The increase primarily reflects the impact of acquisitions plus a 70 basis point uptick from Q1 on total SG&A. We still anticipate that DXP will benefit from the leverage inherent in the business despite increasing operating dollars supporting our growth, cost inflation, and the impact of acquisitions. Turning to EBITDA, Q2 2023 adjusted EBITDA was a record $45.3 million. Adjusted EBITDA margins were 10.6%. This is our second quarter of sequential adjusted EBITDA margins in excess of 10% and we would look for this to continue. Year-over-year adjusted EBITDA margins increased 264 basis points or $12.7 million. This reflects the fixed-cost SG&A leverage we experienced as we grow sales. This translated into 2.5x operating leverage. In terms of our EPS, our net income for Q2 was $19 million. Our earnings per diluted share for Q2 2023 was $1.06 per share versus $0.74 per share last year. Of note we returned $25.1 million to shareholders through the share repurchase during Q2. Turning to the balance sheet and cash flow. In terms of working capital, our working capital increased $22.4 million from December and $15.8 million from March to $299.4 million. As a percent of last 12-month sales, this amounted to 18.2%. We are still at a point where we are in line with our historical average of ranges in terms of investing in working capital. But as discussed in Q3 of last year, this has begun to move off our Q3 2022 high of 19.9% of last 12-month sales as we have onboarded some of our recent acquisitions for a full 12 months. We do anticipate further acquisitions. So as we move into the second half of 2023, this could move upwards. In terms of cash, we had $15.5 million in cash on the balance sheet as of June 30. This is a decrease of $30.6 million compared to the end of Q4 and $42.7 million since March. This reflects the purchases of two acquisitions, Florida Valve and Riordan Materials, and share repurchases. In terms of CapEx, CapEx in the second quarter was $1.8 million or a decrease of $2 million compared to Q1 2023. We are still ahead of our fiscal year 2022 levels as we reinvest in some of our facilities and equipment on behalf of our employees. As we move forward, we will continue to invest in the business as we focus on growth. Turning to free cash flow, free cash flow through Q2 or year-to-date was a positive $18.4 million which reflects a minus $4.2 million during the second quarter. This reflects significant investments in project work along with a reduction in payable days. That said, while we continue to make improvements in our free cash flow when we are growing DXP makes significant investments in inventory and project work throughout the year and we have experienced significant step-up since Q4 of last year. Return on invested capital ROIC at the end of the second quarter was 32% and continues to be above our cost of capital and is reflecting our improved profitability levels. As of June 30, our fixed charge coverage ratio was 2.73:1 and our secured leverage ratio was 2.53:1 with a covenant EBITDA for the last 12 months of $161.9 million. Total debt outstanding on June 30 was $425.9 million. In terms of liquidity as of the quarter, we were undrawn on our ABL with $2.7 million in letters of credit outstanding with $132.3 million of availability and liquidity of $147.8 million including DXP’s $15.5 million in cash on the balance sheet. In terms of acquisitions, we closed on two acquisitions during the quarter, Riordan Materials and Florida Valve. We are excited to have them reporting with us for the second quarter of 2023. Both provide leading platforms within the municipal and industrial water and wastewater industries. DXP's acquisition pipeline continues to grow and the market continues to present compelling opportunities. Our acquisition strategy has created significant value for DXP enhancing our end markets, margins, and DXP's cash flow profile. Looking forward, we expect this to continue through 2023, and we look forward to closing a minimum of two to four acquisitions during the second half of 2023. Updating our thoughts on capital allocation, our primary goal still remains to invest in our business, including the execution of our acquisition strategy. We are also committed to maintaining a conservative balance sheet as demonstrated by our target leverage ratio of 3.5 times or less. To the extent that we have excess capital after achieving these objectives, the share repurchase program will provide us with the mechanism to return capital to our shareholders. During the quarter, as previously mentioned, we repurchased $25.1 million and year-to-date $34.2 million in DXP stock or a total of 749,000 shares in Q2 and 1.1 million shares year-to-date. As we move into the second half of the year, we remain confident that our well-balanced business, strong balance sheet, exceptional DXP people, growing capabilities, and strong acquisition pipeline position us well to navigate the current environment and achieve continued success. The balanced end market mix and geographic coverage offer us multiple avenues to grow and create value for our customers and suppliers while providing important resiliency in unpredictable markets. In summary, we are pleased with our progress at the halfway mark and we look forward to finishing 2023 strong as we approach Q3 and Q4. I will now turn the call over for questions.

Operator, Operator

Our first question comes from the line of Tommy Moll from Stephens Inc. Tommy, go ahead.

Tommy Moll, Analyst

Good morning, and thank you for taking my questions.

David Little, Chairman and CEO

Good morning, Tommy.

Tommy Moll, Analyst

I wanted to start on some of the average daily sales insight. You provided first I just want to make sure I heard correctly. So, it's $6.8 million reported that would be $6.7 million excluding the M&A impact. Did I hear that correctly?

David Little, Chairman and CEO

Yes, that's correct, Tommy.

Tommy Moll, Analyst

Okay. And then Kent you provided some of the monthly insight. Can you just run through the months again? And were those on an as-reported basis, or were those excluding the M&A as well?

Kent Yee, CFO

That includes acquisitions. But what I'll do is I'll walk you through the trend in the quarter and give you a flash draft for July. So, April was $6.65 million, May $6.5 million, June $6.91 million, and then July $6.57 million.

Tommy Moll, Analyst

Thank you. That's helpful.

Kent Yee, CFO

Our year-to-date average is about $6.6 million. I hope that provides some insight into the trends in DXP.

Tommy Moll, Analyst

Yes. And then the $428 million you reported for the quarter I think it was the 11th consecutive of sequential sales increase. Based on that July trend and everything today would your best guess be that Q3 could be up again sequentially from that $428 million, or is there another factor you'd point us to where flat or even a down sequential might be more realistic at this point?

David Little, Chairman and CEO

I’ll take that one, Tommy. Yes, we want to keep our streak alive, and we're working hard. We have many growth strategies to achieve this, even though it's clear that the Fed is using interest rates to slow the economy, which we see reflected in certain markets. However, there are also markets where we see growth. It really depends on the mix of these factors, but aerospace, energy, water and wastewater, as well as food and beverage, are all markets that are expanding for us. We're putting in significant effort to counterbalance some of the other markets that are experiencing a slight slowdown. However, our goal and our optimistic outlook are that we will maintain our streak, even though I don't view a small percentage of growth as a negative. For example, if we achieve 1% growth in the third quarter, that would translate to a 12% growth year-over-year, and we would definitely be pleased with that.

Tommy Moll, Analyst

Fair enough.

Kent Yee, CFO

And Tom, I want to add that our acquisition pipeline is still intact. If we manage to complete one or two deals this quarter, depending on the timing, that would align with David's comments and contribute positively to our performance. I hope that provides you with some additional insight.

Tommy Moll, Analyst

Yes, that's helpful. Thank you. On margins, second quarter in a row above 10% for EBITDA. Peeling back the layers, you got a pretty big tailwind on the gross margin side just under 31% for the quarter which is the highest in a long time. So, I wondered if we could talk to the gross margin performance. What can you tell us about the price-cost dynamic and the inflationary cycle? And then at the same time, is there any M&A or mix impact worth calling out as well on that gross margin performance?

David Little, Chairman and CEO

Our goal is to achieve 30%, so slightly surpassing that is a significant benefit for us, and we're pleased with that outcome. When analyzing the factors contributing to this achievement, we consider our business mix, as some areas yield higher gross profits than others. For instance, Supply Chain Services has low growth of around 20%, with SG&A at 10%. Despite this, it maintains an operating income margin just below 10%, along with an EBITDA margin of 10%. Their minimal investment in working capital is an advantage since customers handle that. We're satisfied with the returns from Supply Chain Services, and I want to clarify that we're genuinely pleased with this aspect. However, if this segment becomes a larger portion of our revenue moving forward, our gross margins may decrease since it operates on low gross margins and expenses. Conversely, the water and wastewater segments have high gross profit margins because they often work on commission-based jobs, achieving a gross profit margin of 100% on those. They also engage in substantial resale, which contributes healthy margins. Innovative Pumping Solutions works on a competitive bidding basis for larger projects, leading to margins that are neither as low as Supply Chain Services nor as high as service center margins. Therefore, if this area grows as a percentage of our MRO center services, it may also impact margins. Overall, we anticipate a blend of margins that aligns with our goal of over 30%. We don’t foresee any significant one-time events that would negatively affect this, aside from product mix. I'm very pleased with our team's ability to manage inflation and supplier costs effectively. We believe these results will remain stable, whether we end up at 29.5% or 30.5%; either outcome is satisfactory to me, as both represent positive performance.

Tommy Moll, Analyst

Yeah. I want to talk about M&A in depth before we hit that topic. Let's address the oil and gas end market dynamics. I mean you're looking at crude back into the mid-80s that are. So what observations would you have for us about the underlying trends there?

David Little, Chairman and CEO

I will study that thoroughly, and here's what I understand. There’s a lot I don’t know, but I do know that our current drilling techniques involve lateral lines ranging from 1 to 2 miles, significantly improving the efficiency of each well drilled. This means we can operate fewer rigs while still increasing our oil and gas output. It's important to note that our focus is on production, not just drilling. When we started, we had approximately 9,000 drilled uncompleted wells, which has now decreased to around 4,000. I'm not providing exact numbers, but it's in that vicinity, and this means we can enhance production without additional drilling. However, it’s worth noting that oil and gas are finite resources; we need to produce more just to maintain current levels. Currently, we’re producing around 12.2 million barrels per day, fluctuating between 11.9% and 12.3%. This situation is beneficial for our operations and the equipment at the well site and in the gathering system. We observe strong activity in our sector. Additionally, we are exploring various energy sources, including hydrogen projects and corn ethanol, and we’re involved in other energy markets. While we work on wind turbines, we don’t manufacture them, nor do we engage in solar panel production. Our perspective on energy involves balancing renewable fuels and oil and gas. There may not be enough oil and gas for renewables to fully replace them, which could lead to rising oil and gas prices. This is an ever-shifting landscape. I don’t claim to have all the answers, but these factors indicate that both renewables and oil and gas are essential for meeting global energy needs. We anticipate a strong market in the coming years.

Tommy Moll, Analyst

Moving on to M&A, I think I heard you guys mention something in the realm of two to four deals you hope to close by the end of the year. Any insight you can give us on what that pipeline looks like? Are we talking tuck-ins or maybe something larger or whatever insights you can provide though, I recognize it's delicate given these are still in the pipeline, but anything you can provide is helpful.

Kent Yee, CFO

I appreciate your insights, Tommy. Firstly, I want to emphasize that the M&A markets are robust, providing many opportunities for DXP. As for our pipeline, the two to four deals we're considering align with our main focus areas of water and wastewater, as well as rotating equipment as a broader product category. Importantly, the valuations we are seeing meet our expectations, making the goal of securing 2% to 4% quite feasible. Deals in the water and wastewater sector will definitely enhance our margins, both gross and EBITDA, while those in the rotating equipment sector are generally beneficial for our gross and EBITDA margins as well. We are enthusiastic about our pipeline and are taking the time to be more selective due to its fullness. We feel positive about our prospects. Some potential deals are smaller tuck-ins, while others might approach our average acquisition size, which ranges from $25 million to $35 million in sales. We will see which deals we can finalize by year-end, but we are optimistic as we look ahead to 2024.

Tommy Moll, Analyst

You mentioned water wastewater a couple of times, and this is the last theme I wanted to address today. It has clearly been a focus regarding inorganic capital allocation and the deals you've executed in recent years. You indicated that it tends to enhance margins.

Kent Yee, CFO

Yes.

Tommy Moll, Analyst

Which I presume is one of the reasons you're attracted to it, but maybe even at a higher level refreshes on the strategy for building out that platform what you like about the structure of that market. And then if you look back at the progress you've made and the platform you have today how would you characterize it in terms of scale and how much more scale do you hope to add going forward? Thank you.

Kent Yee, CFO

Yes, I'll address that and then let David discuss the broader strategy for the water wastewater segment. We have always considered it a platform that has the potential to grow to somewhere between $350 million to $500 million. Currently, we are slightly over $100 million. Additionally, I want to mention that we have been involved in the water wastewater sector, but in the past, we did not make a deliberate choice to expand through acquisitions as we do in today's market. I’ll pass it over to David to elaborate on this, but we are very optimistic about it, and as you noted, it enhances our margins in multiple ways.

David Little, Chairman and CEO

So specifically, it's not a cyclical business. People need water, clean water, and we need to dispose of waste. The aging market and infrastructure are driving a lot of repair and replacement activity, which is boosting this particular part of the industry. Additionally, we are a pump company focused on industrial and utility businesses. As experts in pumps, we understand their technical aspects, as well as repair and service. We have been involved in water through pumps and are looking to add more to our product offerings. This includes not only more repair capabilities but also industry-specific valves and automation. We are building a comprehensive platform that encompasses these essential elements: pumps, valves, repair, automation, and adding process equipment, which is somewhat new for us. This introduces chemical aspects and presents great growth opportunities for those operating in the municipal sector who previously only dealt with pumps. This has been an exciting time for us as part of our growth strategy through acquisitions across the United States, providing new solutions to help businesses grow that may not have seen significant growth in the past. The market has improved, our offerings have expanded, and customers appreciate having more than one service available. Being able to provide pumps, process equipment, and comprehensive service solutions creates significant excitement.

Tommy Moll, Analyst

We'll look forward to continuing to follow the progress there and for today's purposes that's all I have. So I'll turn it back.

David Little, Chairman and CEO

Thank you, Tom.

Operator, Operator

I was just giving you a moment. But, ladies and gentlemen, thank you. That concludes our call today. Thank you for joining us.

Kent Yee, CFO

Thank you.

David Little, Chairman and CEO

Thank you.