Arq, Inc. (ARQ) Q4 2018 Earnings Report, Transcript and Summary

Good morning. My name is Denise, and I will be your conference operator today. At this time, I would like to welcome everyone to the Advanced Emissions Solutions Q4 2018 Earnings Conference Call. [Operator Instructions] Thank you. Ryan Coleman, Investor Relations, you may begin your conference.

Thank you, Denise. Good morning, everyone, and thanks for joining us today for our fourth quarter and full year 2018 earnings results call. With me on the call today are Heath Sampson, President and Chief Executive Officer; and Greg Marken, Chief Financial Officer. This conference call is being webcast live in the Investors section of our website, and a downloadable version of today's presentation will be available there as well. A webcast replay will also be available on our site and you can contact the Alpha IR Group for Investor Relations support at 312-445-2870. Let me remind you that the presentation and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to the factors identified on Slide 2 of today's slide presentation and our Form 10-Q for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission. Except as expressly required by securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, it's very important to review the presentation and today's remarks in conjunction with the GAAP references in the financial statements. So with that, I'd like to turn the call over to Heath Sampson. Heath?

Thanks, Ryan, and thanks to everyone for joining us this morning. Let's begin on Slide 3 and review our fourth quarter and full year 2018. Heading into the final quarter of 2018, our focus remain on driving RC cash flow and supporting Tinuum to identify tax equity investors for the remaining idle RC facilities. As previously announced, the progression of these efforts facilitated the closure of the 19th RC facility in October of last year, as well as the 20th in January of this year. Both facilities are units that had previously entered into the engineering and installation phase and are both royalty bearing to the company. The facility leased in January was installed at a coal burning power plant that has historically burned more than 3.5 million tons of coal per year. This incremental tonnage is part of the 12 million tons that we previously identified with expectations to close in 2019. Installation costs to Tinuum are between $4 million and $6 million per facility, and therefore, these costs have highly -- has slightly reduced near-term distributions. However, taking the step has contributed to the improved cadence of discussions and the momentum of the pipeline as we progress into 2019. We continue to believe that these capital expenditures are the needed steps to leasing or selling the remaining units and ultimately increasing RC cash flow to the company between now and the end of 2021. Shortly after announcing our third quarter earnings in November, we announced our intention to acquire Carbon Solutions, a North American leader in powdered activated carbon market or PAC. This was certainly the highlight of fiscal 2018 as we have welcomed Carbon Solutions back to the company and significantly enhanced our suite of products for mercury control. We were in discussions to acquire Carbon Solutions for over a year and our patience paid-off for us as we're able to acquire the number one asset in the marketplace for an extremely attractive price. This acquisition of Carbon Solutions products, assets and expertise immediately makes us the lowest cost producer and the North American market leader in the mercury treatment space for coal-fired utilities and other industrial companies. It simultaneously opens the doors to other attractive and growing market opportunities while complementing our existing RC segment and offering both, revenue and operating synergies to be realized. The acquisition officially closed on December 7, and today we're even more confident and excited about the future opportunities presented to us. The initial customer and employee feedback during the integration process has been overwhelmingly positive and encouraging. And the overall activated carbon market though dynamic remains attractive. Notwithstanding the acquisition, we remain committed to our emphasis on returning capital to our shareholders. I'm proud to say that we returned over $45 million to our shareholders during 2018 through both, the quarterly dividend program and opportunistic share repurchases. Going forward, we remain committed to the dividend and we continue to have option to buy back stock under the new $20 million authorization that we announced in November. With that high level review, let's turn to Slide 4 and revisit the strategic priorities laid out at the beginning of last year. First, with the de-emphasis of our old emissions controlled platform, we turned our focus to optimizing our internal resources to support Tinuum efforts to add tax equity investors for the remaining facilities. Throughout the first half of 2018 we worked alongside Tinuum as both our existing RC customers, as well as potential RC investors digested the impact of tax reform on the respective businesses. This included the changes to the corporate tax rate and the Base Erosion Anti-Abuse Tax or BEAT which we publicly commented on February 2018, as well as numerous other nuanced impacts. As a result, the first half of 2018 progressed a bit slower than we would have liked, however, after working with these investors to attain further clarity, momentum accelerated into the second half of the year with RC closures in June and October, as well as another in January to kick-off 2019. As a result of our changes to our operating resources, excluding cost of sales, acquisition and severance-related costs, our total operating expense for the full year 2018 was lower than 2017. Our next strategic goal we laid out was our commitment to returning capital to our shareholders. During 2018 we purchased 2.4 million shares for a total of $25.3 million, and paid out $1 per share in dividends for the full year for an additional $20.2 million return. Under the capital allocation plan, we returned $45 million to our shareholders in 2018 and nearly $78 million since the plan's inception. And finally, we discussed that we would evaluate our [indiscernible] options for our suite of chemical technologies on our emissions control platform. Our acquisition of Carbon Solutions met each of our stated criteria. This acquisition will allow us to realize operating and revenue synergies and significantly enhances our mercury control offering. It also provides us the path to monetize the sizeable balance of deferred tax assets on our balance sheet by providing a scalable profitable opportunity. And lastly, the new business will provide a sustainable revenue and earnings stream, along with attractive adjacent market opportunities beyond the exploration of RC tax credits at the end of 2021. Overall, I'm pleased with the year we had and even more excited about the future. We will continue to focus on maximizing our RC cash flows while integrating Carbon Solutions and addressing market opportunities within the North American PAC space. Our financial position is very healthy, and we will continue to facilitate our capital allocation plan. I'll now turn the call over to Greg Marken, our CFO; to review our financial results before providing some further detail.

Thank you, Heath. Let's start on Slide 6 and review our financial results from the fourth quarter and the entire year. Our total cash position as of December 31, 2018 was $23.8 million, a decrease of roughly 22% from the end of 2017 and $8.1 million lower than our cash balance as of September 30, 2018. The decline was primarily driven by repurchases of outstanding shares, dividends and costs incurred as a result of our acquisition of Carbon Solutions. During the fourth quarter, we utilized roughly $14.2 million to repurchase outstanding shares leaving us $5.8 million remaining under the repurchase program as of the end of the year. And as Heath mentioned, we repurchased 2.4 million shares for a total of $25.3 million throughout 2018 and we will continue to opportunistically reduce our share account. Our current total cash balance includes $5.2 million of restricted cash as shown in the orange box, materially related to the $5 million minimum cash balance as part of the senior term loan. You will notice we have added our current and long-term borrowings to this slide which we will continue to highlight going forward. Our borrowings totaled $74 million which is comprised of our $66 million related to our senior term loan incurred to finance the acquisition, and $8.2 million of capital leases assumed as part of the acquisition. Prior to this reporting period we had no long-term obligations or debt. As stated on our special call in November, this term loan is provided by a leading financial institution and long-time shareholder, and we are grateful for their support. The loan itself carries a term of 3-years and has mandatory amortization requirements. We feel very comfortable with the customary and standard covenance of the loan and given our robust cash flow projections, expect to pay-off the balance at under 3-years without penalty. Equity method earnings in the fourth quarter totaled $16.4 million, slightly lower than the $17.8 million observed during the fourth quarter of 2017. Near-term earnings from Tinuum were lower largely as a result of increased capital expenditures incurred by Tinuum Group to install the auto-refined coal facilities lowering distributable earnings to Tinuum's equity members. On a full year basis, 2018 equity method earnings totaled $54.2 million, which was modestly higher than the $53.8 million in 2017. This slight increase was driven by additional investment in refined coal facilities and tonnage partially offset by the previously mentioned installation costs. Fourth quarter total revenues were $10.6 million compared to $3.8 million in the prior year driven by higher royalties and consumables revenues during the period. For the full year, revenue totaled $23.9 million compared to $45.4 million in 2017. The year-over-year decline was a result of the recognition of equipment sales revenue in the prior year as we work through our commitments to that legacy business. That decline was partially offset by higher consumables revenue and royalties in 2018. Full year revenue from our consumables business was $8.7 million, more than twice the prior year amount and $5.6 million was contributed by Carbon Solutions. Royalty income for the full year was $15.1 million, more than 55% higher than $9.7 million in 2017. Our other operating expenses which represent total operating expenses exclusive of cost of sales were higher in both the fourth quarter, as well as the full year relative to the comparable periods in 2017. The increases were primarily driven by $4.5 million at costs throughout 2018 incurred related to our acquisition of Carbon Solutions, as well as personnel reductions occurring both prior to the acquisition and as part of the acquisition of roughly $3.1 million. Excluding the acquisition and personnel related costs, full year operating expenses would have been $16.5 million, roughly 32% lower than the $24.1 million reported. Fourth quarter net income of $7 million was flat compared to the prior year while full year net income was $35.5 million or roughly 27% higher than the $27.9 million in 2017. The full year improvement was driven by higher consumables revenue in royalty income, higher equity earnings, lower interest expense and lower tax expense compared to 2017. During the fourth quarter and as part of acquisition and purchase price accounting, we reported a $6 million step-up in the value of finished goods inventory which will be amortized in the cost of sales during 2018 and 2019, and negatively impacted earnings during 2018 by roughly $1 million. The remaining balance to be amortized as of the end of the year was $5 million. Also as of January 1 of this year, Tinuum has adopted a new revenue on lease accounting standard. Now this change does not affect the financial results we are reporting today, it will impact the manner in which we report our earnings and our investment in Tinuum Group in the future. We expect that this adoption will remove us from our historical memo [ph] account and result in us reporting an investment in Tinuum Group and our prorata share of Tinuum Group earnings on a go-forward basis. However, I do want to emphasize this adoption does not impact the amount or timing of expected cash flows related to the Tinuum entities, nor does it impact the total projected RC cash flows from Tinuum through 2021. I'd like to take a brief moment to discuss the integration process of Carbon Solutions thus far. During the abbreviated period from deal close on December 7 to the end of the year, Carbon Solutions contributed $5.6 million in revenue, as well as pretax income of $400,000. Exclusive of the previously mentioned inventory step-up, our pretax contribution would have been $1.4 million. During the shorten period capital expenditures were negligible. From an annual perspective for 2018, Carbon Solutions results would have been revenue of approximately $60 million and EBITDA of $7 million exclusive of $7 million of transaction and severance costs Carbon Solutions incurred. The variance from the expected EBITDA and actual results were supported between lower volumes which were driven by customer optimization efforts driving efficiencies in their compliance programs and SG&A items that we anticipate are non-recurring in nature. As we look to 2019, we expect this business to grow based on historical contracts that were signed last year in cost synergies. As we continue to integrate the business, we expect to provide a more formal outlook during our second quarter earnings call. However, we have been very satisfied with the integration progress to-date as we have captured our expected synergies. I'll now turn the call back over to Heath to walk through our go-forward strategy.

Thanks, Greg. I'd like to take a moment to discuss the refined coal environment. Let's turn to Slide 8 and discuss the refined coal backdrop. As we have discussed over the last few quarters, we continue to see tailwinds around the Tinuum's efforts to grow the additional facilities. These tailwinds are the results of IRS tax credit clarification achieved in early 2018 and increasing clarity on certain provisions within the tax bill which has helped tax equity investor to better understand the true impact of tax reform on our businesses. On the other hand, our biggest challenge to obtaining new tax equity investors remains the public and political stigma of being associated with co-fire power generation. All our current tax equity investors, and more pertinent our prospective investors are risk adverse to the stigma and intolerant to any environmental reputation risk. Tinuum works hard to educate prospective investors to this tax incentive with instrumental enabling the development of mercury control technologies and as a whole, refine for truly health reduced harmful emissions. Turning to Slide 9, you can see the number of invested facilities versus the number awaiting for tax equity investors or waiting to be installed as of December 31, 2018. Please note, that this graphic is as of December 31, 2018, and thus does not include our January closure of the 20th RC facility. So as of today, we have 20 invested facilities and 8 uninvested. To maximize this refined coal opportunity and secure additional investors for the remaining units, Tinuum has proactively installed facilities in preparation for investment, and three are currently in the installation phase. During 2018, Tinuum spent roughly $17 million related to capital expenditures, nearly all of which was engineering and the installation costs. Tinuum and it's members, including us, would certainly not be incurring these costs if we were not confident that we would translate these into future RC facilities. We have active ongoing conversations with potential tax equity investors for several facilities. Should we finalize deals on our current discussions, they have the potential to add an additional 8 million to 9 million in annual tons to Tinuum's total in 2019 bringing the full year to approximately 12 million tons. This could increase Tinuum's invested tonnage by more than 10%. Let us turn to Slide 11 for an update of our expected future RC cash flow. As of December 31, 2018 and inclusive of 19 refined coal facilities invested with third-party investors, we now expect net RC cash flows to range between $200 million and $225 million to ADES through the end of 2021. Again, this is not inclusive of our January closure and each additional facility could individually add between $5 million and $7 million of incremental annual cash flows to ADES. This has been our number one priority and are committed to leasing or selling the ideal units is unaffected by our integration of Carbon Solutions. It is critical that our investors understand that our acquisition is truly additive to our core refined coal business. Also remember the refined coal is run by an experienced management team which involves our furnace owners including us for oversight and strategic guidance. This structure will allow us to continue to execute in refined coal while devoting the researches necessary to win with Carbon Solutions. Now let's move on to Slide 12 and briefly review this acquisition. The integration of Carbon Solutions will now form our Power Generation and Industrial segment or PGI, as we may refer to this going forward. This segment was previously much smaller and was referred to as emissions control. This segment will now comprise of significant component of consumable sales including the newly acquired activated carbon business, selling to power generation and industrials, as well as our legacy technology such as [indiscernible]. The addition of Carbon Solutions makes us the market leader in North American mercury control market which is supported by long-term highly recurring contracts. To win in the North American mercury controlled markets, company's need an activated carbon plant that is also supported by both, front-end and back-end technologies. We are now the only company that has this full suite of solutions. Further, this is truly unique and strategic set of assets. We've spent $75 million to acquire a vertically integrated business with $400 million state-of-the-art manufacturing facility. The collection of assets in low cost operating status makes it a truly unique platform. This is an asymmetric opportunity that we believe has limited downside but significant upside and we feel very comfortable in our ability to win, either on price for commodity products or on superior technology and service for premium products. The highly recurring nature of these requirements based contract also provides revenue visibility and customer retention. We have already had success in the brief period of our combined company of renewing 10 existing contracts and signed 9 new contracts with valued customers, all with varying durations and volume expectations. As we have been discussing for the last few years, we believe this industry has been transitioning due to the supply and demand imbalances and has added strategic inflection point. We've been a part of this industry for many years now and we believe that we have executed this acquisition at the opportune time as price increases have stuck and significant capacity have been taken out of the market. Fourth, we view this platform as growth oriented. Last year the plant ran at modest utilization levels and as we drive utilization closer to the industry average of 85%, we expect our already pronounced cost advantage to compound even further. We'll work through an incremental share and ready just for markets, while evaluating adjacent growing channels such as municipal order and the broader commercial and consumer market, as well as geographic expansion in other adjacent industries in the future. Fifth and finally, this unique strategic fit that Carbon Solution brings, we are excited to reunite and believe that we were the natural buyer for this asset. In our first few months as the rejoined company, employee feedback has been terrific. Our new ownership rightsize the asset value to the current market and brings new growth opportunities to all the associates at Carbon Solutions. The sharing of industry knowledge and pairing off are now complete emissions controlled treatment offering has been well received by our customers as well. In fact, we have begun to recognize opportunities to expand our potential product offerings with our respective customer bases which has facilitated better organic expansion of our customer base. Integration of people, employees, customers and vendors requires focused effort and discipline which many companies take for granted and underestimate the level of sustained attention needed; we haven't and it is paying off. Another unique opportunity that only we as the buyer possess is that we will be able to better transition our utility partners refined coal volumes when the Section 45 tax credit expires at the end of 2021. As these refined coal units are taken out of service, their coal-fired sponsors will need products to control mercury. There are approximately 75 refined coal installations across the country generating 170 million tons of refined coal per year. Many RC users will need a solution to comply with mercury regulations and through our ownership in Tinuum and Carbon Solutions, as well as our existing product suite, we will be well positioned to capture incremental mercury control demand as these units retire. We believe that the market opportunity related to these utilities is approximately $35 million to $45 million annually. This incremental volume will go to the bottom-line given our significant contribution margins. In other words, this market will grow when refined coal units lose their tax credit eligibility, and there is nobody better positioned to capture this incremental volume than us. Let's move to Slide 13 and quickly review our strategy. This slide shows our roadmap for the new ADES and how we plan to leverage our new assets to become a North American leader in activated carbon within multiple diversified industry, both today and tomorrow. We already try to be positioned for profitable growth due to solidification of our new leading position in the segment. The mercury controlled market in North America is competitive and has undergone significant changes over the past few years as coal burned has shifted to natural gas. As a result, many coal-fired power generators have dramatically reduced headcount and are continuously looking for cost savings. They simply do not have the bandwidth or resources anymore. They are now looking for fewer strategic vendors that can provide more for less. We are best positioned to be the supplier of choice for this changing power market. Gaining incremental share with the North American mercury control by driving performance either by pricing power or premium service or products is priority one. Next, we are also in position today to achieve further penetration into the municipal water treatment market. This market is £100 million demand environment in the U.S. and is growing, providing the [indiscernible] addressable adjacent market to grow within. It is also a highly fragmented base comprised of many producers and resellers. The initial opportunity this market will not require any incremental plant investments to expand our purpose. To better position ourselves in this space we have focused a limited number of existing employees here and believe this will lead to positive longer term results. Longer term we aim to grow our share in the industry that commands premium products and thus premium price points. We see a bigger opportunity in the broader consumer and commercial water market estimated to be £310 million per year. As everyone has seen over the years in the press, clean water is in increasingly demand both here and across the globe; this market combines higher margins by approximately 20% to 25% compared to mercury control and has higher growth rates. However, entering this market would take additional upgrades to the existing facility while feedstock and will require additional capital investments. In addition to position ourselves as the leader in North American mercury capture and activated carbon, and pursuing adjacent market opportunities such as water, we also evaluate international markets as mercury control regulations outside of U.S. mature, as well as adjacent markets like food and beverage, other consumer products and various others. The broader water market and other more specialized adjacent market opportunities have higher growth rates and higher margins; nothing less, these are initiatives of tomorrow. We have focused immediately on organic growth within the mercury removal and municipal water space. Moving on to Slide 14, let's recap our return of capital plan. Since the start of the capital allocation program in the second quarter of 2017, the company has paid $35.9 million in dividends and utilized capital of $41.7 million to repurchase shares. We paid our fourth quarter dividend on December 6 and our 2019 first quarter dividend on March 6 to shareholders of record as of February 19. These initiatives remain a key focus of ours and we believe we generate sufficient cash flows to both, on our capital return commitments and investment to business. Finally, let's introduce our 2019 priorities for Slide 15. Unchanged from prior years is our ongoing commitment to leasing additional RC facilities and supporting Tinuum efforts to secure tax equity investors. Maximizing RC cash flows will continue to be our first focus. Our second strategic goal will be the integration of our newly acquired assets, people and operations, to immediately capture share in the North American mercury control PAC space. We will simultaneously evaluate a pursue adjacent attractive opportunities in higher growth verticals like water. We see compelling opportunities to increase utilization rates within our recently acquired assets and generate high margin revenue. And finally, we will continue to return capital to our shareholders through our continued commitment to our quarterly dividend program, as well as the opportunistic repurchasing of outstanding shares. I'm incredibly excited to build on the momentum we accumulated during the second half of 2018. We continue to believe we are truly entering a new phase of our commitment to driving shareholder value. So with that, we will take some questions.

[Operator Instructions] Your first question comes from Amit Dayal with H.C. Wainwright

Congratulations on all the progress being made. Just in regards to Carbon Solutions could you comment on how you expect to sort of recognize this $60 million to $70 million in revenues over the four quarters? And what are the growth drivers beyond the $60 million -$70 million levels that could come into play here?

We'll get -- we're 100 days into this acquisition, I'm really excited about everything we're doing and really want to give more guidance on our revenue and margin expectations and we'll do that here in the second quarter. But just to touch on what you're saying because I'm confident of what we have and even more excited about this opportunity. The revenue that we have from Carbon Solutions is recurring, a good chunk of it, 80% plus is on recurring contracts right now. So the growth that we expect to see out of there is combining all our products together, whether that's PAC or current emissions control technology and providing those full set of solutions to the market place. So a lot of them will be to gain market share from competitors and we can do that by competing on price because we're the lowest cost provider for commodity products. In addition to that, also higher service in premium products because we have all these great assets combined and a great R&D team and a great sales team we're able to actually win on gaining market share within the premium products. And as I mentioned as well, many utilities are going through a big change, so their number one priority is of course to be in compliance. And they are looking for solutions that are better and cheaper and in many cases these better products allow them to actually lower the better operating costs, so they are looking to us to help drive their compliance needs, as well as reducing costs. So we will gain market share from competitors competing on price, and then also competing with additional premium products and services. In addition of that, as refined coal begins to roll off, starting really in 2019 there is a few -- I'd say probably 10% to 20% or probably less than 20% of refined coal rolling off in 2019, the majority of them rolling off in 2021. Those utilities like I said will need mercury control, and again, we have unique knowledge because we also run refined coal and then in addition to our understanding of the rest of the customer base we are well positioned to see growth in that. And as I mentioned, that revenue opportunity is between $35 million and $45 million. And then lastly, so that's mercury control space. The water space which is much larger, both in the U.S. and globally; we are focusing right now on utilizing our current assets and that's allowing us to grow in a unique segment within the municipal space and we're seeing and committed to growing that space as well. So we have relatively low volume, so our growth is expected to be high within that space. And as we mentioned, the market is fairly large, I think our expectations are reasonable on our growth expectations for this year and going forward. So I look forward to sharing with you more detail on that but hopefully that's helpful to give you clarity on why we're excited about what we have here.

And then in terms of the remaining RC facilities, could you remind us how many are now not deployed?

Yes, we have 20 installed and 8 -- 20 operating and invested, and then we have 8 that are waiting to be installed and/or waiting for investors.

Do you see [indiscernible] some of these to come into play in terms of deployment?

Yes, we do, so it's interesting. So the Tinuum team did an incredible job, especially over these last half of 2018 when these large corporations got understanding of their tax position and were comfortable with refined coal market. We saw many participants that were completely out of the market come back in. So that's great for the industry as a whole. So really these tailwinds have started for these last couple of quarters, and we are in a lot of discussions and expect more closures to happen. As we stated, we closed on one, it's about 3.5 million tons and we see it aligned to get to 12 million within 2019. We are in various discussions beyond that but we're early on, so we're comfortable with that 12 million commitment that we have. It's tough to nail down timing, and it's tough to say they will ever close until they close, but again, with where the market is and the great job that the Tinuum team has, and our understanding of where we are in those discussions, we are comfortable that we're going to have more closures here in 2019.

Your next question comes from Sameer Joshi with H.C. Wainwright.

Just following up on some of Amit's questions. Since there is no prepayment penalty of the loan that you have, would you be prioritizing the loan payment as compared to buying back share or issuing dividends?

Yes, we will make sure that we're strategic in the way we're looking at. We're going to evaluate -- the dividend is obviously a main priority for us. And then, the debt repayment and additional share repurchases, we'll evaluate that when we have the cash to do so and look to pay that down aggressively but we believe we can do all three with the cash flow that we have coming.

And I think at the time of announcement of the acquisition you had said that there is Red River plant that has under-utilized capacity for Carbon Solutions. When do you expect to utilize that and are there any additional capital expenditures or expected to be incurred for that?

Yes. So that is the number one priority is to sellout that plant. It's exciting that we were able to acquire an asset that has a base of over 400 million and has capacity. So it's really a priority for us to fill that plant up because as you could imagine, the incremental margins on that are great, so filling is up, it goes straight to the bottom-line. And that range of incremental margin anywhere from 60% to 75%, so it is a top priority. When we get it filled up, it's going to be a priority for us this year and the following years and we'll hopefully give you a little more guidance into that feed and utilization rate come second quarter. To your second question, and this is really important, especially for the near-term. The assets that we have now, the markets that we are going after in mercury and municipal water do not take any more investments. Obviously, we have normal CapEx and recurring operating costs but we do not need to make any major improvements to go after our current markets that we're in.

And just to one last one; there would be some acquisition related costs -- some consolidation, when do you expect that to run through the system and have like clean steady state going forward?

We would expect the vast majority of that would roll through in the current year in 2019, and we're working hard on that integration plan. Obviously, there is a lot of aspects to that but our belief is that we would materially capture all those costs within the current year.

In addition to that as Greg mentioned earlier, so we're incurring all those costs and we have achieved all our related synergy that we expected in the business case as well. So it's a great work by the team. And again, through 2019 we don't expect any more beyond 2019.

There are no further questions. At this time, I will turn the call back over to Heath Sampson.

Great. Well, thank you everyone for your time today and your continued support. I look forward to updating you on our next quarter. Have a great day, everyone.

This concludes today's conference call. You may now disconnect.