DMC Global Inc. (BOOM) Q4 2017 Earnings Report, Transcript and Summary

Greetings and welcome to the DMC Global 2017 Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Geoff High, Vice President of Investor Relations. Thank you, please begin.

Hello and welcome to DMC’s fourth quarter conference call. Presenting today are President and CEO, Kevin Longe and CFO, Mike Kuta. I would like to remind everyone that matters discussed during this call may include forward-looking statements that are based on our estimates, projections and assumptions as of today’s date and are subject to risks and uncertainties that are disclosed in our filings with the SEC. Our business is subject to certain risks that could cause actual results to differ materially from those anticipated in our forward-looking statements. DMC assumes no obligation to update forward-looking statements that become untrue because of subsequent events. A webcast replay of today’s call will be available at dmcglobal.com after the call. In addition, a telephone replay will be available approximately two hours after the call. Details for listening to the replay are available in today’s news release. And with that, I will turn the call over to Kevin Longe. Kevin?

Thanks Jeff and hello everyone. DMC reported a strong finish to fiscal 2017 with fourth quarter sales and gross margin exceeding our forecast. Fourth quarter sales were $54.5 million, which was up 4% sequentially and 36% versus last year’s fourth quarter. The results were driven by another record quarter at DynaEnergetics, our oilfield products business which reported sales of $37.1 million, up 5% sequentially and 115% versus the comparable quarter last year. During the fourth quarter, DynaEnergetics accelerated production of its intrinsically safe DynaSelect detonator and the factory-assembled, performance assured DynaStage perforating system. The reliability, efficiency and cost benefits of these advanced technologies continued to drive strong demand from operators and service companies in North America’s onshore, unconventional oil and gas sector. NobleClad, our explosion welding business reported fourth quarter sales were $17.4 million a 3% sequential improvement and a 24% decline versus the 2016 fourth quarter. The year-over-year decline reflects the impact of several orders that were put forward into the 2016 fourth-quarter as well as continued weakness in global industrial infrastructure spending. Fourth-quarter consolidated gross margin was 33% which was flat sequentially and up from 25% in last year’s fourth quarter. Higher average selling prices in a more profitable product mix at DynaEnergetics drove the year-over-year improvement. At the business level, DynaEnergetics gross margin was 38% while NobleClad was 22%. We recorded $3.8 million in fourth quarter restructuring charges associated with the consolidation NobleClad’s European manufacturing facilities. Excluding the charges, fourth-quarter adjusted operating income was $4.3 million versus an operating loss of $1.9 million in last year’s fourth quarter. DynaEnergetics reported operating income of $6.6 million while NobleClad reported adjusted operating income, which excludes restructuring charges of $777,000. Fourth-quarter adjusted net income was $1.3 million or $0.09 per diluted share versus the net loss of $2.2 million or $0.15 per diluted share in the year ago fourth-quarter. This year’s fourth quarter included in income tax provision of $1.6 million $946,000 of the provision was the transition tax related to the recently enacted Tax Cuts and Jobs Act. Fourth quarter adjusted EBTIDA was $7.7 million versus $8.6 million in the third quarter and $1.5 million in the 2017 fourth quarter. At the business level DynaEnergetics reported fourth-quarter adjusted EBITDA of $8.3 million while adjusted EBTIDA a NobleClad was $1.5 million. The momentum we carried in the fourth-quarter’s continued into fiscal 2018. Customer demand continues to grow at DynaEnergetics which is proceeding on schedule with a significant expansion of its production and assembly capacity. The business opened two new DynaStage assembly lines at our manufacturing facility in Braddock, Pennsylvania and a new automated detonator line will begin production at our facility in Troisdorf, Germany next month. This new detonator line will double the production capacity of our DynaSelect and DynaStage initiators and provide important manufacturing redundancy. In Blum, Texas the foundation is being poured and utilities are in place and 74,000 square feet of additional manufacturing, assembly, and administrative space. These facilities will house two new highly automated shaped charge production lines that are expected to be operational in July. They also will provide additional DynaStage assembly space as well as room for new administrative offices. We are on pace to commence operations at the facility in the third quarter of this year. Earlier this week, DynaEnergetics announced a favorable ruling by the U.S. Patent Trial And Appeal Board regarding a Patent infringement action filed against the business by GEODynamics. DynaEnergetics denied it had infringed on the Patent and questioned its validity. The appeals board agreed with DynaEnergetics and rule that the challenged claims are unpatentable. At NobleClad two large orders both during the fourth quarter increased the order backlog to $37.5 million, which is the strongest backlog reported by the business since the first quarter of 2016. About capital spending in most of NobleClad’s industrial end markets has not shown meaningful improvement, quoting activity has been healthy and the business is optimistic it will achieve improved bookings during 2018. At DMC, we recently entered into a new $75 million credit facility that will give us important financial flexibility as DynaEnergetics executes its capacity expansion. In addition, our businesses have now blonde record 11 consecutive months without a lost time accident, which is especially notable given the expansion of our workforce during that timeframe. I am very pleased by the performance of our businesses during 2017 and even more encouraged by our prospects for 2018. DynaEnergetics is transforming the operating model of the perforating industry and this is resulted in a strong response from the businesses expanding customer base. NobleClad remains at the forefront of the global explosive welding industry and is pursuing a series of new application opportunities that should strengthen long-term demand. Given the improved fundamentals of both businesses, I am confident DMC is ideally positioned to continue its financial and operational growth during the coming year and beyond. With that I’ll turn the call over to Mike for some additional comments on our fourth-quarter financial results and Outlook for 2018. Mike?

Thanks Kevin, and good afternoon everyone. I’ll start with a review of our fourth-quarter expenses. SG&A was $12.5 million or 23% of sales versus $10.9 million or 27% of sales in the fourth quarter last year. The increase resulted primarily from higher salaries and wages as well as increased outside legal expense associated with ongoing patent litigation. Fourth-quarter amortization expense was $1 million or 2% of sales. As Kevin mentioned, in the fourth quarter of 2017, we reported a provisional U.S. tax liability $946,000 for the transition tax related to the U.S. Tax Cuts and Jobs Act enacted in late December. The transition tax is on historic foreign earnings that had not been taxed in the U.S. We believe the U.S. Tax Cuts and Jobs Act will benefit of course with the reduction of the tax rate on U.S. earnings from 35% to 21% and with the move to a territorial system that will enable us to bring back profit earned in foreign jurisdiction with minimal U.S. tax impact. Looking at our balance sheet, we ended 2017 with cash and cash equivalents of $9 million. Net debt was also $9 million, down from $9.3 million at the end of fiscal 2016 and $13.1 million at the end of the third quarter. We generated cash from operating activities of $6.2 million during the fourth quarter, while full-year operating cash flow was $6.7 million. With respect to guidance, we expect first-quarter sales will be in a range of $59 million to $62 million versus the $39 million we reported in last year’s first quarter. DynaEnergetics sales should be a range of $43 million $45 million and we expect NobleClad sales should be in the $16 million to $17 million. First quarter gross margin should be 30% to 31% versus the 27% in last year’s first quarter. SG&A is expected to be approximately $12.5 million versus the $11.7 million reported in Q1 last year, while amortization expense is expected to be approximately $800,000. We anticipate adjusted EBITDA of approximately $8.5 million versus the $930,000 reported in last year’s first quarter. For the full fiscal year, we expect sales in the range of $255 million to $270 million, up from last year’s $192.8 million. We expect sales of DynaEnergetics to be in a range of $180 million to $190 million and NobelClad sales in a range of $75 million to $80 million. Gross margin is expected a range of 31% to 32% versus the 31% in 2017. Full-year SG&A should be a range of $50 million to $52 million the anticipated increase versus the $45.7 million reported last year primarily due to capacity expansion initiatives at DynaEnergetics . Full year amortization expense is expected to decline to $3 million from the $4.1 million in 2017. The decline reflects the full amortization of a portion of DynaEnergetics intangible asset balance. 2018 adjusted EBITDA is expected in a range of $39 million to $43 million up from 2017 adjusted EBITDA of $23.1 million. We anticipate approximately $1.5 million in additional restructuring expense related to the completion of NobleClad’s European consolidation. Full-year interest expense is expected in a range of $2 million to $2.5 million. Capital expenditures in 2018 are expected to total approximately $30 million, $25 million of which will relate to the capacity expansion at DynaEnergetics. Our total debt should top out at approximately $40 million later this year and should then begin to decline once the new capacity at DynaEnergetics comes online. As Kevin noted, we recently entered into a $75 million credit agreement which consists of the $50 million senior secured revolver and a $25 million capital expenditure facility. The revolver replaces our $435 million revolving facility. After one year the capital expenditure facility converts to a term loan that amortizes that 12.5% per annum over the remaining four year term. We intend to use the term loan for DynaEnergetics capacity expansion initiatives. And with that, we are ready to take any questions.

[Operator Instructions] Our first question comes from the line of Gerard Sweeney with Roth Capital. Please proceed.

Hey good afternoon guys.

Hey, Gerry how are you?

All right. Congratulations on a great quarter and eye popping guidance.

Thank you.

My first – I think the real question here is, you know we’ve always talked about the market opportunity, how big this market could be and how much of the market DMC can be. And we’re looking at this guidance for this year and you actually have capacity constraints with and then you are adding capacity in the second half. Could you maybe frame out what you are looking for now – I mean this is looking out for 2019, but looking out what does this market opportunity present to you guys. I mean, it’s got to be quite large and you must have a cat eye at the tail at this point.

Well thank you for that. I don’t quite feel we have the cat by the tail. But we’re comfortable with the guidance that we are giving for this year, and our ability to hit that guidance is dependent on our ability to execute and execute well, which I have a lot of confidence in our team. I believe the growth after 2018 is really predicated on how our markets perform.

Got it. And I mean as you look at our customers, I mean are you – let’s put it this way, if you add this capacity and you double capacity, are you going to be sold out, I mean can you see what your customers are requesting today, versus what you have versus the expansion projects in place?

Right now our demand or the demand for our intrinsically safe products is exceeding our capacity. And as we bring on capacity we would expect our revenues to continue to improve as well as our earnings. We are not trying to be all things to all people Gerry, and we are interested in making sure that we support our customers and help them to be successful in the marketplace and more profitable, which is driving our technology investments. And so I really think that as we go on from here, you know it’s we are not trying to corner the market on our initiating systems, we’re just trying to serve the customers that value those products and in that we can help to perform well for their E&P customers.

Sure. I mean they check a lot of boxes.

Yeah and Gerry, we’ve got good competitors in the industry to and so I don’t want to ever get overconfidence in the skills and abilities of our competitors to in this marketplace.

You know that was a natural follow up, obviously I think you must be shaking things up a little bit and clearly people must be taking notice. How strong is your competitive advantage? We've spoken about this in the past in terms of DynaSelect to market technology, etcetera and everything like that, but as you are looking out into the market, just maybe some commentary on how far ahead of the competition you are or what’s that per se?

Well I know what we are working on, I don’t know what they are working on. And again, I don’t want to underestimate we’ve got smart competitors that have resources that they can dedicate to this market. We do – we’ve been working on our intrinsically safe product line or detonator product line for many years. We’ve in revision number seven or eight in terms of the product improvements that we’ve made to that product. And that product is helping us to do some of the other things that we do such as selling our DynaStage systems. And we have know-how in technology around the product itself. We also have know-how and technology around the manufacturing of these specialized detonators and so we feel fairly comfortable with our competitive position. However, there are other ways for accomplishing the same end result. They are not as safe or as effective or reliable as the technology that we have that there is you do have competition on it.

Got it. And I don’t want to [Indiscernible] income that’s certainly for sure. So I hate this, I know you don’t want to get too much into this, but it did put some pricing across all DynaEnergetics products 5% to 8% back in January. Just curious, is this a function of recapturing some price concessions from years past? And with this price raise, are you back to where you would like to be? Or is there opportunity? And is this – the price increase, does that offset any of your own cost or was it just a opportunity to gain price and margin etcetera?

Well, we have had some cost increases in this market. We’ll have more going forward. And obviously we want to stay neutral with those price increases and if possible strengthen our margins. To-date we've been recovering margin from the downturn. There’s a supply and demand aspect to the ability to raise prices. But more importantly it depends on our ability to create products that help our customers to perform better and to be more profitable, and that ultimately determining the value that we get for our products. And we have a number of improvements that we intend to keep introducing as this year progresses, and as well as into next year, and our ability to stay out in front of the technologies can determine our pricing power.

Got it. And this is a question about the Blum facility of the expansion. They expected opening in – I think you said July. I think there’s a natural ramp up progress or progression but doesn’t go from zero to full capacity day one. So, what would the natural progression of that launcher or opening and how will that sort of progress through the year from start to full capacity? And I'm assuming that is just added revenue for the second half of the year?

It’s baked into our guidance.

Yes.

But throughout the year our capability will increase. These capital programs take time. We actually were -- forward with this in 2017 where we started placing orders for equipment and working on the design of our production lines in our building. We’ve had machining equipment already delivered in our couple of our facilities. We have the detonator line which is a critical and high-technology line being delivered in Germany sometime this month that would be up and running in the April. We have two new buildings under construction in Blum, Texas one which will house the assembly space for our DynaStage factory assembled performance to show perforating systems. It also will include more machining capacity. We've got the machine tools on order. We expect those to be delivered beginning in May and through June, July, August. We’ve got bunkers under construction shaped charge, two shaped charge lines and buildings. The two shaped charge lines are ordered, the building is under construction. We expect this to be completed in the third quarter and we’ll start to see the capacity start ramping in the third quarter and carried on through to the balance of the year. Obviously, we wish it was on board right now, but we’re also felt that we ordered and started this process at the right time, given how the industry was unfolding and evolving in a positive way.

Yes, sure. It's been exceptional. So can't complain about that. Just one more then I’ll jump back in line. Your competitor that like to challenge the patent aspect that is a shaped charges. Are they going to with this last to see, of course, I know there’s several lawsuits out there. Any sign of them giving up and what has been the – what’s the legal like cost run rate? I think it’s been upward, almost close to a million bucks if my memory serves correct. And is that in SG&A guidance etcetera for the rest of this year?

Yes. In 2017, we spent approximately 4 million on legal fees. The majority of which was related to defending these patents are the patent challenges. Our competitor -- our competitors are smart competitor and they’re determined people. We respect them. And you know it's -- we've been fortunate to-date on the rulings, but we don't -- we got a couple other actions that are taking place and we’re not letting our guard down on that or getting overly confident that winning on the for to-date issues doesn't necessarily mean we’ll win on the next couple.

And I’d say, this is Mike, Gerry, I’d say that in 2018 we got similar level of spend as we did in 2017 just noting that it’s difficult to predict but we will expanse this.

So that’s fair. I mean that was quite big. Got it. I’ll jump back in line. Congratulations and always thanks for your time.

Yes. Thanks Gerry.

Thank you. Our next question comes from the line of Edward Marshall with Sidoti & Company. Please proceed.

Hi, Kevin, Mike, Geoff, how you guys doing?

Fine, Ed. How are you?

I’m doing pretty well. I wanted to ask – I wanted to start with the capacity expansion, the 25 million in DynaEnergetics. What was due to your capacity? Kind of talk about maybe the timing and maybe if you could even the revenues associated with that, I’ll appreciate it.

We’re not giving guidance yet in terms of the revenues for 2019, but we do feel that with this capacity in place that we won't be capacity driven, we’ll market-driven after completion of these projects. We’ve grown quite a bit compared to the prior year we expect to grow a fair amount this year. Just to put it in perspective, adding this detonator line will more than double our capacity in detonators, which has been one of the bottlenecks along with shaped charge production.

So, I mean, can we look at to the function of maybe volume that’s you produced this year and talk about the volume that you might assume if the market has it demand there that you be able to -- for at least what you’d be able to produce? We’re just trying to get a perspective of what it really means for $1.5 million is actually implying?

Well, we’re doubling our detonator capacity and we’re in Texas where we’re tripling our shaped charge capacity?

And what is that to gun systems?

They’ve really follow those components. The other variables detonating code which we do not have any capacity constraints on or hardware guns which are not necessarily an issue either, we’ve got a supply base for guns.

So, are you saying that if you have the double capacity for detonators and I think you said, triple capacity for shaped charges that you’d able to at least double your gun systems that you sent – you sold in the fourth quarter?

Yes.

And I’m curious with the $25 million I guess the term loan. You talk about the amortization of about 12.5%. Does that run through interest expense or is that run function of D&A? And I’m curious if there are other penalties for paying that down early?

Yes. This is Mike. It does run through interest expense, so it’s an adjustment to EBITDA and there’s not prepayment penalty on the term loan. That’s going to be use to fund the CapEx expansion.

And then, I correct in thinking that’s about 12.5% interest rate. Is that the way that was explained?

The amortization is 12.5% per year, but the interest rate follows our underlying revolver which is LIBOR plus spread. So currently we’re paying about in the roughly 4% range for interest expense. And that’s the revolver for working capital as well as the term loan for the CapEx.

Got it. Okay. So it wasn't interest expense. When I think about this capacity coming online, obviously your capacity constraint right now, I wanted to know what you think about what that does to pricing in the business. I mean obviously you’d like to hold it, but I know that there is a function of kind of where we look for on demand, you want product we got to pay for. How do you think about that you kind of move into 2019? More importantly I guess how would your customers think about?

Well, I don’t think we’re trying to take advantage of a shortage of supply. Your customers that were trying to support are very important to us and we’re trying to price our products in a way that they can depend upon and with this capacity comes on stream, we’re going to go from being capacity constrained to having the ability to supply. And so we’re charting kind of a fair and smooth course through that and really pricing based on the value that our product create for our customers.

Okay. Maybe I can ask you different way, you’re looking at – I’m looking at the last two quarterly gross margin around 33%. As we look at the guide for Q1 that’s down about 200 basis points in the guide. I’m curious what’s the function behind that to step down in gross margin?

The step down in the first quarter is just soft or weak margins in NobelClad. It’s a combination of the lower sales levels of 16 million to 17 million. There's part of – and most of it though its product mix because we’re shipping a portion of the large $7.4 million order that we announced in last quarter, portion of that is shipping in the first quarter, a big portion of that carries lower margins.

Got it. So that they were some favorable pricing on that $7.4 order?

It’s just a matter the materials involved and it’s just a little bit of a lower margin order than our average order if you will.

Got it. At least measure materials I guess it’s a good segue to the next question, what are the tariffs mean to dynamic materials or DMC go along. I understand your kind of Global business so maybe you can put that in perspective, but also you consume a lot of those materials onshore and you ship overseas as well, so maybe kind of talk about how you think about tariffs and what that might mean to the business?

Yes. What’s most important and I’ll discuss NobelClad first is that our fabricator customers are profitable. And we do have some concern that the fabricator customers their cost to materials are going up. They are also competing with fabricators for the types of projects that we work on a global basis. And so we’re concerned that it’s going to lesson their competitiveness, competing against other fabricators that come from outside of the country. So that the concern. Steel prices, aluminum prices will go up, which means the costs of our raw materials are going to go up and we passed those cost on. We’re fortunate to have a very strong facility in Germany and we have the opportunity to supply from the different locations, so we also have to look at how that market and that economy response to these tariffs. And that is yet to be determined. But I could see some potential dislocation of work from here to other facilities that we have depending on their competitiveness.

And did you want to touch on DynaEnergetics?

DynaEnergetics is consumable. The steel that goes into their perforating guns, we’ll probably see increases on. And those increases will be passed on in terms of the cost of our products. And so ultimately it has an impact on the competitiveness of -- not competitiveness, excuse me, but the profitability of our customers, E&P customers that are using not just our products but everybody's products. I don't think it changes our competitive position as much as it changes the cost of perforating equipment going into the well.

Got it. And then my final question from me is you had another multi-tax quarter. I’m sure you’re looking to put that behind just as much as we are, but can you talk about what U.S. tax reform means to DMC and how you expect to maybe effective tax that’s probably to discuss for 2018 and beyond?

Yes, Ed, 2018 still be challenging for the next couple of quarter to calculate a meaningful rate because we’re still in loss position in certain jurisdictions where we can’t record the associated benefits and then other profitable jurisdictions we’re recording tax expense. So still going to be wavy here in 2018, but overall the passage of the tax cut and jobs act is beneficial for us from a medium to longer term perspective our effective tax rate globally should be sub 30% probably in a 28% range is the way to think about it.

Got it. Appreciate your comments guys. Thanks very much.

Yes. Thanks, Ed.

Thank you. Our next question comes from the line of Samir Patel with Askeladden Capital. Please proceed.

Hi, guys.

Hey, Samir. It’s good to hear you.

So, I guess to start off kind of going back to Gerry's questions and some of the other analyst’s questions and then trying to approach it from a different way. You guys have kind of talked about trying to get a 20% share of the market that is suitable for the high-end premium products that you provide. Talk about all of these capacity expansions and all that. Can you look at that the guidance for DynaEnergetics for 2018? What component of that is U.S. and then what market share of the U.S. market does that represent to kind of help us get a better understanding of what it looks like in the out years?

Yes. Samir, in our forecast DynaEnergetics, the America is becoming increasingly large share of the global sales and so all ballpark of 80% for North America in terms of the total sales for 2018. And as far as the market share or market size is concerned you’ve got a estimate of our revenues, we’re expecting the market to continue to grow nicely this year. Our share is really capped by our capacity and right now its kind of a moving target on how fast the market grows and I prefer not to get into share because it varies by different product lines that we have and our share is really driven by intrinsically safe detonating systems, our initiating systems in which we don't necessarily have a direct competitor.

Sure. Okay. Transitioning from the top line to the margin side, obviously you guys are expecting pretty good revenue for next year. I was actually little surprise that you’re not expecting higher EBITDA margin which are friends at GEODynamics got acquired by oil states and so there's some interesting information there and it looks like their margins in the GEODynamics segment are about 23%, 25% of what they're expecting, which is fairly similar or maybe little bit higher than what it looks like you're expecting out of DynaEnergetics. So I’m curious is there any in this guidance is there any impact from ramping up this new facilities that maybe won’t be as efficient kind of day one. And then how do you see that margin playing out over time, is it going to stable or do you expect to continue gain a few points of margin in DynaEnergetics side?

Yes. Samir, this is Mike again. So DynaEnergetics, their EBITDA margins are probably going to be -- we anticipate 23% to 25% range, so I think that lines up pretty well. When you look at DMC consolidated in our guidance it’s probably closer to 15% with the addition of NobelClad in the corporate structure.

Okay. Got it. And is that I mean, was Dyna again kind of going back to the pricing and the other question, do you feel like you're at for the margins you want to at or do you feel that you continue to grow the business there's opportunities for margin expansion?

We’re not quite at the margins that would like to see. We expect to see some growth in margin which we’ll get through both volume and efficiency as the business continues to grow.

Go ahead.

Yes. There’s some pricing opportunity or I should say cost opportunity, margin improvement with some of the new products that will be introducing as the year unfold.

All right. And then kind of looking past 2018 I mean obviously you guys are spending a lot of money on capacity expansion but after that you should be generating fairly significant free cash flow other than paying down that term loan what is your focus become at that point in terms of strategically financially allocating that?

One of our objectives is to have a very strong balance sheet. We’re going to pay down the term loan as well as try to fund our working capital growth out of earnings and start using our cash like we have been using it, which is to invest in new products and new technologies and new capabilities, and those to take a number of different evidences as we look forward.

Okay. And is that still kind of all oilfield related or do you consider adding maybe another legs to the tools at some point?

Right now, we have a handful serving our oilfield customers and that's what we’re most focused on serving today.

Okay. Thanks. Appreciate the color.

Thank you. [Operator Instructions] Our next question comes from the line of Jim McIlree with Chardan Capital. Please proceed.

Thanks. Good afternoon. I’d like to figure our – or I’d like to understand better how the capacity expansions are going to impact the revenues for the year. So you got -- in Q1 you have the benefit from the expansions that took place in Q4. And then the next big bump up in revenues would come in Q3. Is that right? And then you have another bump in Q4?

Yes. We would see, Mike you want to go ahead on how that’s.

Yes. In our forecast we’re looking at for DynaEnergetics and particular about 45, 55 in terms of our revenues spread first half versus second half.

Okay. And so you exit the year at 50 million to 55 million per quarter revenue from DynaEnergetics. Is my math right on that?

I think we’re -- that certainly possible, may be a little bit lower than that.

Okay. I'm not trying to get to pin you down to an exact number, I just trying to get – just trying a trajectory of how it plays out for the year. Okay. That’s fair enough. And so I think you’ve said a couple of times that once these announced capacity expansions are complete, does that you have ample capacity going forward? So you’re not going to be capacity constrained at that point and the growth will just be whatever market share you can obtain? Am I understanding that correctly?

Correct. Our competitors are not sitting still. So, and we feel that we have a unique product that creates value for our customer, but we expect a strong competition going forward.

Right. Understood. Okay. Very good. That’s it from me. Thanks a lot and good luck.

Thanks.

Thank you. We have no further questions in queue at this time. I’d like to hand the floor back over to Mr. Longe for closing remarks.