Broadwind, Inc. (BWEN) Q1 2021 Earnings Report, Transcript and Summary

Greetings, and welcome to the Broadwind First Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference to your host, Jason Bonfigt. Thank you, you may begin.

Good morning, and welcome to the Broadwind First Quarter 2021 Results Conference Call. Leading the call today is our CEO, Eric Blashford; and I'm Jason Bonfigt, the Company’s CFO. We issued a press release before the market opened today, detailing our first quarter 2021 results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the Company’s control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call today in our press release issued this morning. At the conclusion of our prepared remarks, we will open the line for questions. With that, I will turn the call over to Eric.

Thank you, Jason, and welcome to those joining us today. After reporting strong full year results for 2020, which included significant growth in total revenue, margin capture, free cash flow and adjusted EBITDA. Our first quarter results were impacted by a number of near-term headwinds, including pandemic-related supply chain challenges, a week-long weather-related outage at our Texas facility in February and a shift in the timing of a tower customer order from the first to the second quarter. Despite these challenges, our business began to stabilize in April as supply chain challenges have begun to subside, resulting in improved utilization rates at our production facilities. Additionally, the presence of unfairly priced imports continues to negatively impact our business. Nevertheless, we are forecasting sequential growth in both revenue and adjusted EBITDA in the second quarter of 2021 when compared to the first quarter. Demand fundamentals in our core wind energy markets continue to strengthen. During the past decade, cost competitiveness of wind improved materially versus other forms of energy, with the unsubsidized levelized cost of wind energy having declined 70% since 2009. In addition to this major cost reduction, policymakers have set forth incentives to drive increased third-party investments in wind technologies, setting the stage for greater investments in renewable energy. In December 2020, Congress approved an additional year of the PTC at the 60% subsidy level, together with a new 30% ITC for offshore wind, creating the potential for increased tower demand over the medium term. Longer term, we view the recent decision by the Biden administration to reenter the Paris Climate Accord, the increasing potential for a new infrastructure spending bill, together with the reintroduction of the GREEN Act, as favorable catalysts for the sector. Given the success of the anti-dumping and countervailing duty investigations in December of 2020 and the continuing efforts to ensure an even-playing field in the U.S. We believe domestic wind tower manufacturers are uniquely positioned to benefit from these favorable market dynamics. As we have done throughout the pandemic, we continue to produce and ship products that meet and often exceed our customers' exacting application requirements. Order rates in our non-wind markets improved dramatically in Q1 as our customers return to a more normalized cadence of activity following a prolonged period of disruption. Our tower orders doubled in the first quarter 2021 versus the prior year period as several customers secured 2021 production capacity. The strengthening of quoting activity we began to see towards the end of 2020 continues, and we anticipate a gradual recovery in the first half 2021 order flow. The full impact of the pandemic on our business and end markets remain difficult to quantify, but we anticipate that current cash and availability on our credit facility will continue to provide adequate liquidity to support our business during this transitional period. Within our Heavy Fabrication segment, we experienced a 46% year-over-year decline in tower sections sold in the first quarter due to the reasons just mentioned. As we have discussed on previous calls, orders in the towers business tend to vary from quarter-to-quarter. However, first quarter orders were well above the prior year first quarter, even as our backlog decreased. At this time, our optimal power capacity is about 60% booked for 2021, and we are in continuing discussions with our OEM customers to satisfy their tower customer demand for the remainder of the year. Within Gearing, pandemic-related delays in customer order activity in the second half of last year resulted in lower segment revenue during the first quarter. However, we are beginning to see early indications of improved demand activity, with backlog nearing pre-pandemic levels. Revenue for our Industrial Solutions segment increased on a year-over-year basis as demand improved within the natural gas turbine market. As I referenced earlier, our first quarter results were impacted by a series of nonrecurring events that we believe are largely behind us. I'm proud of the way our team responded to these issues, as they focus on keeping our plants running and our people safe as we successfully met our customer commitments. With that, I will turn the call back over to Jason for a discussion of our first quarter financial performance.

Thank you, Eric. Turning to Slide 6 and 7 for a high-level overview of our first quarter performance. First quarter consolidated sales were $32.7 million compared to $48.6 million in the prior year quarter. In Q1, we worked through a number of challenges, primarily in our Heavy Fabrication segment, which ultimately led to a 33% year-over-year reduction in revenue. The largest impact to the decline in revenue was related to demand for our towers, combined with the wind repowering project in the prior year period. Additionally, one of our customers delayed a project resulting in a $4.7 million revenue deferral to Q2. We continue to experience supply chain disruptions during the first quarter. Tower internal packages, which are required for the final step in production for delayed, resulting in ability to recognize $2.8 million of revenue at quarter end. We lost more than 1 meg of production out of our Abilene tower plant in February due to the impacts of winter Storm URI. Severe weather conditions also drove approximately $200,000 of additional natural gas expense at one of our other facilities as increased usage during the storm exceeded fixed contract levels, forcing spot market purchases during peak pricing. We subsequently reopened the facility without significant delays or damaged. However, we lost valuable production slots as a result. These reductions were offset by the mix of tower designs produced and related steel content, which varies by customer design and application. Q1 adjusted EBITDA was $1.2 million, a decline on a year-over-year basis, driven by the volume impact described earlier. Despite the operational challenges in our towers product line, we are encouraged by improving branch performance in our encouraged by improving branch performance in our other product lines, which are generally tied to an economic recovery. During the first quarter, the company was eligible for the Employee Retention Tax Credit, or ERC, as outlined in the provisions of the CARES Act and other subsequent revisions. In Q1, we earned $3.4 million in refundable tax credit which are a component of EBITDA in the segment financials as the credit will be utilized to offset increased payroll costs resulting from pandemic-related disruptions described earlier. We expect to be eligible for the ERC again in Q2, given our interpretation of current guidance. First quarter operating expense was essentially flat year-over-year. Interest expense declined to $200,000 from $700,000 in the prior year quarter due to lower debt levels and a reduction in our borrowing rate. Turning to Slide 7 and 8 for a discussion of our Heavy Fabrication segment. First quarter sales were $22.8 million compared to $38.4 million in the prior year quarter, driven by our previously mentioned comments on lower wind tower demand and continued supply chain disruption as well as other nonrecurring events. First quarter orders were up 34% year-over-year to $20.8 million. And as of this call, we have approximately 60% of our 2021 optimal tower production capacity sold as we continue to market to multiple turbine OEMs. We are also encouraged that our Industrial Fabrication orders rebounded sequentially in Q1 to approximately $7 million as mining and industrial customer demand recovers following the challenging 2020. Notwithstanding the Q1 operational challenges, which delayed delivery and revenue recognition on approximately 75 sections to Q2, segment adjusted EBITDA was $1.8 million. As we discussed earlier, we continue to sell towers to multiple turbine OEMs, which has been a key strategic objective over the past several years. This customer diversification as well as expansion of our industrial fabrication product line and success in several trade cases has allowed us to improve our plant utilization over time. And as a result, EBITDA margins have expanded. Turning to Slide 9, I will cover our Gearing segment. We are encouraged by the economic recovery and our position within energy and industrial market. We began to see our pipeline of opportunities improved in the second half of last year. And in Q1, customers began to place orders to restock inventory levels and resume capital spending as the economy recovers. Q1 orders approached $10 million, the highest level we have seen since the pandemic started and up approximately 75% sequentially. Book-to-bill was approximately two times, resulting in a recovery of our backlog over $19 million. First quarter segment sales declined to $5.3 million versus $6.2 million in the prior year, a result of lower commercial activity last year. We generated $300,000 of segment EBITDA in Q1, and we expect a gradual recovery in top and bottom line performance throughout 2021 as we begin to execute against our elevated backlog. Turning to Slide 10 for a discussion of our Industrial Solutions segment. Industrial Solutions recorded $3.5 million of new orders in Q1, down from $5.9 million compared to the prior year period, primarily a result of the timing of orders from its primary customer. Our pipeline of opportunities remains healthy, including quoting activities of new customers and end markets. And as a result, we expect the order book to build throughout the year. First quarter segment sales increased to $4.6 million from $4 million in the prior year, given the strength in the gas-driven component demand and by the timing of customer projects. Segment adjusted EBITDA was $500,000 due to the volume impacts and strong execution. The operating leverage associated with increased volume and effective cost management has resulted in TTM EBITDA of $1.5 million, a significant increase over the comparable period. Turning to Slide 11. Operating working capital increased $6.6 million sequentially to $11.7 million or 9% of sales due to increased inventory levels associated with the previously discussed volume impacts in Q1. We view these inventory levels to be driven by extraordinary events and anticipate inventory levels to gradually decline over the next several quarters. Full cash and availability under our credit facility remains healthy and above historical levels, with nearly $22 million of liquidity at quarter end, which includes approximately $3 million of cash on our balance sheet. As mentioned earlier, we will likely qualify for additional ERC benefits in Q2, which are likely to net the company over $6.5 million of cash in the first half of 2021. In Q1, under our previously announced ATM equity offering program, we issued 1.1 million shares of our common stock netting approximately $6.4 million after deducting commissions. As highlighted on previous calls, we received approximately $9 million of proceeds under the Paycheck Protection Program. We submitted our forgiveness applications to our lender and the SBA in Q1 and has subsequently received forgiveness on one loan valued at approximately $300,000. And at this time, we have not received a determination on the balance of the loans. As noted in our press release issued this morning, we expect Q2 revenue to be in the $45 million to $50 million range, with EBITDA between $4.5 million to $5 million after including approximately $3 million of additional ERC benefits. That concludes my remarks. I will turn the call back over to Eric for an overview of end markets, in addition to some concluding remarks.

Thanks, Jason. Turning to Slide 12 for further discussion of our outlook for the domestic wind market. As predicted, 2020 was a robust year for onshore capacity additions with more than 17 gigawatts installed. Projections for 2021 remains strong with approximately 15 gigawatts of installations. While it is challenging for analysts to predict future demand in a rapidly changing environment, both in commercial and political terms, there are certainly some tailwinds for the long-term outlook of wind energy. We have a renewable-friendly administration that has already taken steps to drive renewable investment, including the recent PTC extension and evaluation of the GREEN Act, which includes a longer-term PTC incentive through 2026. An infrastructure bill would likely include a build-out of power transmission necessary to connect new sources of supply to areas of demand. Broadwind supports such legislation and believes it has a high probability of getting passed through Congress and signed into law. This legislation represents both an engine for new job creation and a foundation upon which to modernize our aging energy infrastructure with lower cost renewables. And as turbine technology continues to evolve, new, more efficient turbines continue to drive down the cost of wind energy, while the repowering of existing turbines provides an additional lift to demand. Further, as ESG mandates increase, commercial and industrial buyers will continue to be a major driver of wind power demand in our view. Offshore remains an attractive growth area for wind capacity additions in the U.S. primarily off the coast of the eastern states, with nearly 34 gigawatts of due installations forecasted to be put in service during the next decade. This source of clean power is key to meeting individual state mandates designed to move away from fossil fuels in the medium to long-term. As we look outside of wind, we continue to make exciting progress across a number of diverse end markets, always mindful of our long-term strategy to support the world's transition to a cleaner energy future. Our customer diversification initiative remains central to our overall plan to optimize our factories and retain our critical workforce as wind tower orders fluctuate from quarter-to-quarter. Wind, renewables and other forms of clean power remain core to our business, even as we have increased our non-wind revenue by three times in the last four-years, with non-wind revenue sitting at more than $60 million annually. Today, our fastest-growing non-wind segments include power generation, mining and the industrial segment, which includes our penetration into the material handling and marine markets. In Q1 2021, we did see some continued pandemic-related impact to those more cyclical markets. While we are seeing encouraging signs of increased demand activity and anticipate a gradual recovery in those markets throughout 2021. Looking ahead, our focus remains on growing market share in the areas where we see opportunities for profitable growth, improving our asset utilization, expanding our global supply chain to improve our cost position and reduce risk, all while leveraging our highly skilled workforce. In our Heavy Fabrication segment, we are working to sell the remainder of our 2021 capacity and adding capabilities to improve our asset utilization and output. We continue to evaluate the offshore turbine market in the U.S. for possible points of entry as we continue to expand our mix of complementary Industrial Fabrication customers. We were honored recently by a visit from the Governor of Wisconsin to our Manitowoc facility to acknowledge the completion of a massive crane advocated by Broadwind that will ultimately serve the U.S. Navy. I'm also encouraged by strong early interest we have in our new proprietary pressure reduction systems designed to support the growing virtual pipeline system, which uses cleaner, burning natural gas to replace the less carbon friendly fuels such as coal and fuel oil. In our Gearing segment, we plan to shift our sales mix towards markets which tend to be less cyclical and offer a more balanced revenue stream. And we will continue to grow our custom gearbox business through more emphasis into the repair and upgrade categories. In our Industrial Solutions segment, we will continue to expand our market share both domestically and internationally by increasing content with existing customers and focusing on new opportunities in the EPC space. I'm pleased to report that in Q1, we won an important new gas turbine customer in Algeria, thereby furthering our global reach. In summary, our business remains an attractive participant in the development of technologies integral to the ongoing clean energy transition. We see a long-term path forward within the domestic wind market, given that more than 80 gigawatts of installations are planned over the next decade, including exciting new offshore opportunities. This growth is driven by three primary factors: first, the cost of wind energy has dropped dramatically in the last decade, making it one of the most competitive energy technologies available on the market. Second, we have policymakers providing incentives to encourage investments in wind, including the PTC and ITC announcements and the reintroduction of the GREEN Act, supported by a pro-renewables administration, which has reentered the Paris Climate Accord. And finally, growing ESG initiatives, both mandated and voluntary, will certainly continue to drive demand for wind. Furthermore, the improving U.S. economy and a substantial infrastructure investments being discussed at the federal level, all point to increased third-party investment in the sectors we serve, resulting in a sustained increase in demand for our products. Given the continued strength of our balance sheet, we are well capitalized to pursue both organic and inorganic opportunities that further support our growth strategy. With that said, I will turn the call over to the moderator for the Q&A session.

[Operator Instructions] Our first question is from Eric Stein of Craig-Hallum.

So first, just wanted to start with wind. I know you have got 60% booked. Can you just remind us what is the typical percent that you would have booked at this point in the year? And then what is a realistic capture of what you get? And is that something that there is enough time that it could impact at the back end of 2021 or anything that you fill in terms of capacity is really going to be more towards early 2022?

Sure. Well, at 60%, we certainly have been higher than that in previous years. We'd like to be higher at this point in time, but we are working with our three core customers to fill that capacity in Q4. And there is still time to fill that capacity. I think we have talked about it on previous calls. The lead time for steel and to start production typically in the four to five-month range.

And then, I guess on that topic, steel, given what tripling the prices here and not that long period, can you just remind us the setup there, you obviously use a lot of steel, but I believe it may vary by OEM, but you have got some pretty good mechanisms in there to pass that on.

Sure. Yes. As a reminder, most of our - virtually all of our contracts are direct to buy. We don't take steel risk. And so we purchase steel by project. So we don't have that issue as far as a risk to Broadwind. But we are cognizant of the fact that rising steel prices could impact our customers' bids, but that is not a risk for Broadwind.

Okay. And then last one for me, just interested in the release you put out yesterday, the pressure reducing systems. Can you just help us understand that a little more the - who is your customer there? Is it more the trailer companies? Is it the haulers themselves, the NG advantages of the world or is it the end user? And then what type of - I know it is early, but what type of market opportunity do you see there?

Sure. The customers are varied - we did a lot of homework on this product as we were contemplating it. The customers would be virtual pipeline providers, utilities. There is potential that perhaps a trailer company that would be supporting a virtual pipeline provider would be one of our direct customers. We think the market for that is could approach $100 million. So it is not a huge market, but it would be pretty substantial for us to take a nice share of that market. It fits our strategy because we are supporting the world's transition to clean energy future, and we know that natural gas, in addition to our wind and renewables focus, is a transitional fuel towards that future. So we are happy to be part of that.

And did you get into this area. I mean, clearly, it is a need and you are right virtual pipelines, and that is an area of quite a bit of growth. I mean, is this something where you saw from a competitive standpoint, there was an area that you had a real opportunity a customer nudge in this direction or how did this come about other than it fits all in the strategy?

Yes. A couple of years ago, we were asked by a couple of customers to do some compression technology is, we build to integrate processing skids. And as we were doing the compression for these customers, we realized that their pressure reduction, which is the other end, was a real weakness, and it was something that the customers were having to do themselves. It was kind of an awkward design. And so we thought, look, we took a look at that and figured out how to do a better job at that in terms of packaging, weight, efficiency, and that is where we came idea.

Your next question is from [Sameer Joshi] (Ph) of H.C. Wainwright.

So as far as your opportunity for offshore wind goes, is there any visibility in the near term, in the next two, three quarters and in terms of longer term, mid- to longer-term outlook there, is there any competitive advantage or in terms of the partners that you are working with in winning these offshore wind projects?

The competitive advantages with specific customers, was that your question?

Yes. It is mid to longer-term because I think some near-term opportunities were lost, right?

Sure. What has happened is the near-term opportunities have pushed to the right a bit. The whole market is market is moving to the right a bit. And I think it has to do with maybe timing, some COVID, some has to do with the leasing of certain waters. So we still feel very optimistic about offshore. It is, as I have mentioned before, it is more than aspirational. We believe it is real and it is a real opportunity for us, and we continue to investigate how we might take advantage of that given specific points of entry, whether it be a factory for wind turbine towers themselves or some other point of entry. As far as competitive advantages, since we work with really all 4 major OEMS, we are certainly producing for three of the four now. We feel that we can service any one of those turbine OEMs, and they all have aspirations for that market.

Understood. But just in terms of technological capability, there is nothing that you like that others may as special cans for?

No. Not as far as our capabilities, as we have the capability to produce some sizes of offshore in certain towers in our Manitowoc facility with some moderate investment at this time. But as far as the technology, our know-how and knowledge, we are very well equipped to take advantage of that market because we have built so many different towers for so many different OEMs in our history.

Understood. Good to hear that. Moving on to the Gearing segment, it seems that there could be opportunities there, especially most recent quarter, you have seen a nice order book build there. Going forward, do you see the Gearing segment becoming a larger proportion of your total business in the next two, three, four, five-years?

Well, certainly seeing think that over the longer term, it is a little bit difficult to predict. But over the midterm, we certainly see some tailwinds for that particular segment in terms of opportunities with really all of the markets that we serve. That is the segment that serves the most disparate distribution of customers, and we have a lot of interest in our markets such as in material handling, marine, oil and marine, oil and Certainly, we are in the early innings of a recovery, and that business has been pressured for the last 12-months. But the quoting activities have been pretty strong the last several quarters. You saw the orders really jump this quarter. So it appears that customers are beginning to make purchasing decisions again and increase their inventories we think we are well positioned to grow that throughout the year. And as you know, that can lead to some gross margin growth within our expansion within overall broad as a result.

Yes.

What is of note is, I mean, is those purchases from those customers tend to be capital purchases, either new capital expenditures within their businesses or repairs. And with the growing economy, customers are starting to be more willing to do capital investments.

Yes. Yes. Just a couple of bookkeeping questions. The ERC that you have approximately $60 million in the next quarter - or rather 2Q, do you expect any more in the later half of 2021, the ERC benefit?

ERC.

ERC, I think it is too early to make that call. At this point, we are just planning on a $6.5 million approximately of cash proceeds to be received in the first half, and then we'll evaluate the business in the second half to see if we qualify again.

Yes. And sort of related one, last one. Of the $9.2 million, you got $300,000. Is there any visibility on the other remainder of the amount? I know you said something in the commentary, but can you just give us some more insight into when you expect that to happen?

We have answered several follow-up questions from the SBA and our lender late in Q1, early Q2. So we are optimistic that these will be forgiven here in Q2, but it may slip into Q3. It is just a little unprecedented, and there are quite a few companies that are submitting their forgiveness applications at this point. So we'd expect that lump to have to just roll through the snake here over the next several quarters.

Our next question is from Justin Clare of ROTH Capital Partners.

So I guess, first off, given the challenges that you have seen for securing tower internals, we have seen raw material price increases. And then logistics has been kind of a widespread issue across the economy. What is the risk that we could see some delays in your ability to deliver on your customer orders. And then also, is there any risk that customers could actually push out orders as they may not want delivery right away?

Well, I would say that the supply chain challenges that we have been we have been facing have started to - I'm cautiously optimistic, they are starting to subside. I think I mentioned on 1 of our earlier calls that even shipping containers were a challenge before that has apparently begun to lighten a bit. So in Q2, we are starting to see a pretty good improvement in the deliveries. I'm not saying that, that is a sure thing, Justin, going forward. But we certainly believe that the worst is past us. I know India is being hit now. So if that is spread to the rest of the world that could be a potential risk. But at this point, things are appearing to improve. As far as our customers and pushing things out to the right, that is really hard to predict. I'm aware of some of that, that could be happening, but I haven't heard of anything really substantial that I can share at this time.

Okay. And then I guess, just want to get your thoughts on the potential to that customers might push things to the right? I would think that they want to make sure that they get projects slated for this year completed so they can qualify for the PTC. But then there could be some projects maybe early 2022 push to the right. There may be some possibility there. But how is your order book shaping up for 2022 compared to past years?

Well, I will say, at this time of the year, it is quite early to talk about 2022. But what I will say is customers have begun to inquire as they normally do, about available capacity to both of our plants. So while it is early, Justin, we are getting interest. So that is what I can share at this time.

Okay. Okay, great. And then you mentioned that imports are continuing to impact the business here. I know on a preliminary basis, you have seen some favorable results for the most recent tower trade case. So just wanted to get a little bit more color on what's happening there. Do you anticipate a change in a reduction in imports ahead here? Or do you think we need to see final results on the trade case before there is a meaningful shift in the landscape?

Well, what I can report to you, Justin, as of April, there were preliminary findings for counter-billing duties against Malaysia and against India. There is a recent antidumping preliminary finding against Spain. So with those, I would expect somewhat of a dampening effect, which tends to happen once these preliminary findings are released. But again, as I think we have shared before, these things won't be fully resolved until Q3. They have been resolved a little bit earlier than that. But they won't be fully resolved until Q3. So yes, I think we should be able to see a dampening impact on imports, but I can't be certain until the final determinations are done, which would be in Q3.

Our next question is from Martin Malloy of Johnson Rice.

I just want to follow back up on the offshore wind topic. And we have seen some announcements regarding facilities moving forward in New York and New Jersey here. And it looks like 2024 is going to be the year where we have installations really ramping up. Can you maybe help us think about the timing that you would need to build a new Greenfield plant on the East Coast? When would you need to be awarded contract or contracts to support a Greenfield facility and announce it? Would it be in the next six to nine-months in order to meet the time line of the developers?

Well, there is at least a 10-year projection of increasing installation. So we certainly have plenty of time to take advantage of that. But to take advantage of the earlier year, you probably need to make a decision in the next year. We are thinking between 18-months to two-years max, we could get from the first shovel of dirt to a meaningful output in terms of sections per week, Marty. So I think we have got time. And we are looking with multiple states and multiple sites to see how we might address that market.

Okay. Okay. And then just wanted to ask you on the gearing market. And obviously, commodity prices are up a lot and seeing a lot of talk about expansion projects or Greenfield projects going forward. Looking back to past commodity cycles, can you help us maybe think about the timing of when you really start to see the impact for demand for your components?

I can give some history here on the oil and gas side. That has been as high as $20 million of annual sales. We are well below that at this point because orders have been lagging the last several quarters. So we did see a rebound in Q1. And mining is another component that is going to be tied to what you are discussing. And that has been a more significant portion of our business as well, not to the extent of what I have talked about in oil and gas. But there is some room to run. And again, I think we are starting to hear more from our customers on growth expectations.

Yes. The one market, Marty, that Jason had mentioned was steel. And we know there is a lot of demand for steel. And as the mill starts to ramp up, they start to look at their at their maintenance demand for steel and as the mill starts to ramp up, new and replacement gearing for the steel market as well.

So historically, we have been above $40 million in annual sales in the last several years. We have that as a target, a near-term target. Last year, we are at 25%. So we are expecting to build off of that throughout this year and build up to that range.

Okay. And then my final question, just on the pressure reduction system. I think it is really interesting. And just wondering, are there other new products that we should look out for in this area related to natural gas compression, transportation, regas or perhaps even would LNG be within your capabilities of doing something there on the regas side?

Well, the answer is the growth in LNG certainly helps our Industrial Solutions segment because that particular market allows the export of LNG from the United States to other parts of the world. So that helps the industrial solutions that the facility we have in North Carolina. But what we are aware of and we are taking a look at it, it is very early, Marty, but this pressure reducing system that we have that is designed for natural gas can also be used for hydrogen. And we definitely see that as it is the fuel of the future. It is kind of out there. But we are mindful that our technology can be used for that, and we are starting to talk with some customers about how we can get some early tests out there for that possibility. Okay. And this would be related to hydrogen that is compressed. And then at an end customer or feeling station it would need to be 1a. Yes, we are the back end. This product is for the back end, the decompression at site.

Yes. Great. Okay. Well, thank you for your time this morning.

We have reached the end of the question-and-answer session. I will now turn the call back over to Eric Blashford for closing remarks.

Thanks everyone for interest in our company. We are certainly excited about some great things that are going on with our company and we look forward to speaking with you again, to discuss our second quarter results. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.