Century Communities, Inc. (CCS) Q2 2017 Earnings Report, Transcript and Summary

Welcome to the Century Communities Second Quarter 2017 Earnings Conference Call. As a reminder, all participants in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the call over to Scott Dixon. Please go ahead.

Good afternoon. We would like to thank you for joining us today for Century Communities second quarter 2017 earnings conference call. After the market closed today, we distributed a press release detailing our second quarter financial results. We also posted supplemental pro forma materials for UCP and Century on the Investor Relations section of our website at www.centurycommunities.com. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management’s current expectations and beliefs, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in the forward-looking statements. The company undertakes no duty to update any forward-looking statements that are made during this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. The Company’s presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Management will be available after the call should you have any questions that did not get answered. Hosting the call today are Dale Francescon, Chairman and Co-Chief Executive Officer; Rob Francescon, Co-Chief Executive Officer; and David Messenger, Chief Financial Officer. With that, I will turn the call over to Dale.

Thank you, Scott. Today on the call, I will review our operating highlights as well as the status our merger with UCP, Inc. Rob will then discuss our new and existing home building markets afterwards Dave will follow-up with further details on our financial results, balance sheet and 2017 outlook. Following our prepared remarks, we will open the lines for questions. During the second quarter of 2017, we had significant growth in net new contracts and home sale revenues as well as the number and value of sold homes in backlog while making further progress on many previously announced initiatives. We experienced considerable operating momentum and price gains as we capitalized on favorable demand trends in our key markets. These conditions allowed us to produce another quarter of strong earnings totaling $14.8 million or $0.66 per diluted share compared to $0.62 per diluted share in the prior year quarter. We increased our home sale revenue to $288 million, an increase of 12% from the prior year quarter. We recorded higher prices in most markets to produce an average selling price up 14%, reflecting favorable product mix and core price momentum. Adjusted gross margin of $60.7 million represented another quarter of stable adjusted gross margin percentage of 21.1% compared to 21.1% in the prior year quarter. This consistency in gross margin performance relative to prior year and prior quarter was largely due to higher prices and favorable product in geographical mix, which offset any higher costs across our markets. We ended the quarter with 1,366 homes in backlog valued at $522.6 million. Year-over-year increases up 28% and 29% respectively. This significant increase in backlog homes bodes well for a continuation of our positive earnings trend into the second half of this year. SG&A as a percent of home sales revenues improved by 30 basis points to 11.9%, it was significantly better than the first quarter of 2017. As we move past much of the heavy lifting to ramp up our new home building divisions in Utah and North Carolina, which are progressing according to plan. Our financial services business has also turned the corner with respect to profitability. During the quarter, we began closing home loans and we will continue expanding its reach to our growing portfolio markets. Now an update on our previously announced business combination with UCP, Inc. On Tuesday, we are pleased that UCP shareholders overwhelmingly voted to approve the pending merger. We are excited to complete this transaction tomorrow and welcome the UCP team to Century. The completion of this merger will mark a significant milestone for both companies and solidifies Century’s position as the 16th largest public homebuilder in the U.S. We intend to build on our track record as one of the fastest growing U.S. homebuilders both organically and through acquisitions and accelerate our goal of expanding Century into one of the largest and most profitable U.S. homebuilders. I want to take a moment to highlight a few of the significant opportunities and immediate benefits that this transaction creates. First, we immediately increase our scale with nearly 30,000 owned and controlled lots along with a backlog of 1,778 homes valued at over $710 million on a pro forma basis as of June 30, 2017. We will now operate in 10 states, 17 markets and 111 communities. Second, in the process of expanding our scale, we have created a more geographically diverse portfolio with essentially no overlap. We will have a national portfolio with an established presence in many high growth markets. This provides increased land investment opportunities as well as a mitigated risk profile against volatility in any one market. Third, we believe the increased market liquidity from a larger and broader share base will allow a wider group of equity investors to participate in our exciting story. Fourth, we expect the merger to be accretive to our 2018 earnings per share due to economies of scale and cost synergies that we expect to begin realizing in 2018 ranging from $5 million to $8 million per year. We have studied UCP’s markets for several years and are pleased with the product offerings commitment to quality and opportunities for expansion. We believe the new markets are poised for growth and we look forward to investing in these divisions. We’ve also been impressed by the talented UCP employees that will be joining the Century team, with UCP is well located lots in the high growth markets of California, Washington and the Southeast, partnered with Century strong capital base and tenured homebuilding experience. We believe we can improve the historical velocity and margin profile generated from these land positions. We have been planning and working on the transition since the transaction was announced in April and our team is already hard at work executing our integration plan. This transition and integration plan is founded on achieving Century strategic growth objectives, while furthering our commitment to grow earnings per share and return metrics. As an important first step during the upcoming week, we will begin the process of transitioning UCP and its wholly-owned home building subsidiary benchmark to the Century Communities trade name. We are confident that this rebranding will enhance our combined operations by providing a uniform brand to employees, customers, trade partners and the investment community allowing us to take full advantage of national purchasing synergies and bringing UCP into Century as one unified team. In summary, we are positive on the home building environment in general and ours in particular and we are encouraged by the trajectory of our multi-market strategy. We will move forward with our plans to rapidly integrate UCP with Century. We intend to put our balance sheet to work on sound investments in our home building operations and other avenues that provide attractive returns. We expect to achieve better economies of scale across our expanded footprint while remaining disciplined with our costs to deliver strong earnings growth. With these objectives in place, we are focused on investing time, energy and capital to advance our long-term growth strategy and enhanced our returns on equity. I’d now like to turn the call over to Rob to discuss our markets in greater detail.

Thank you, Dale, and good afternoon, everyone. As Dale mentioned, our sentiment on home – the home building environment remains positive with solid Q2 performance in our markets. Second quarter net new contract grew 18% to a record 1,021 homes led by Atlanta and Las Vegas. We ended the quarter with homes and backlog up 28% to a record 1,366 homes representing a backlog dollar value up 29% to $522.6 million from the prior year quarter. This was made possible by our absorption pace improving by 20%. We increased or held firm on price in key markets with an average selling price of backlog of $383,000 helped by the success of new communities and product offerings. During the past several years, we have effectively demonstrated our ability to deploy capital at attractive returns and believe we are poised for even greater success in the future. The combination of our existing portfolio with UCP’s West and Southeast assets, many of which were purchased at favorable values provides us with exceptional land positions and some of the most robust U.S. homebuilding markets. On a pro forma basis, as of June 30, we ended the quarter with land inventory of 29,602 owned and controlled lots, which are split 50/50 between owned and controlled and are more than double compared to the prior year reported quarter. Looking forward, we see many opportunities where we can invest capital at attractive returns especially in our new West Coast markets. Beginning with the third quarter 2017 results, we plan to report home building and operating metrics in four U.S. regions, West, Mountain, Texas and Southeast. As we consider the significant increase of active markets and the integration of UCP’s operations into our business, we believe this will be a more effect – efficient and effective way to present our business moving forward. We have posted a supplemental on our website, which more clearly breaks down the composition of our business by region on a pro forma basis including UCP. The West will include UCP’s California and Washington businesses, the Mountain region will be Colorado, Nevada and Utah. Texas will include all of our operations in that state, and the Southeast segment will capture the remaining markets of Georgia, Tennessee and the Carolinas. Looking at our market portfolio overall new residential activity continues to perform well. Our deeply rooted positions in attractive regions of the country are and will continue to drive meaningful growth in new contracts, home deliveries and earnings in both our new and legacy markets. Consistent with how we will look at our footprint moving forward, I will walk through our market comments today in accordance with the pro forma regional layout I just discussed. Starting with our Mountain region, we were encouraged by the very positive momentum in deliveries and new contracts, which were both up more than 20% along with a 15% increase in unit backlog. This improvement reflected a very solid pace of activity in Nevada and the continued ramp up of our Utah operation. Each of our markets in the Mountain region benefit from job growth, low new home inventory, low resale supply, rising rental rates and noticeable strength at entry level and first move up price points. In Texas, home sales revenues increased 13% and backlog was up over 40% year-over-year. In both Central Texas and Houston, we are experiencing an increase in demand as we continue our pivot to lower price points. During 2017, we have increased our investment in Texas by 18% and a lot positions by 22%. We are encouraged by the strengthening demand and the overall outlook for Texas region. Looking at the Southeast, limited supply and robust demand is supporting favorable home price appreciation. Our net new contracts in Atlanta increased 19% year-over-year resulting from continued strong absorptions. During the quarter, our Atlanta division closed out and opened 10 communities. The 10 new communities experienced strong absorptions however had no spec inventory to close during the quarter, which led to a lower than expected backlog conversion rate. Pro forma backlog growth for the region was 33% year-over-year. And UCP Southeast markets which include Tennessee and the Carolinas. Revenues were up 30% on stronger selling prices and home deliveries. New contracts in UCP Southeast markets were lower, but we expect a ramp up community openings in coming quarters to capture the robust pace of home buying activity in this exceptionally strong region. Looking to the West, as planned regional segment will be entirely comprised of UCP’s existing operations in California and Seattle, which represented approximately 24% of our second quarter pro forma revenues. In Northern Central and Southern California along with Seattle demand remains strong with new contracts rising 32% during the second quarter and home deliveries up nearly 40%. To the combination of well located communities and attractive product offerings across a diversifier segment, we are firmly situated and take advantage of strong economic employment and population growth. We are encouraged by the homebuilding momentum and both our legacy and new markets and we look forward to generating enhance returns from our expanded geographic footprint. We intend to continue strengthening our presence in the new and existing vibrant markets to grow revenue, profitability and returns on equity. I will now turn the call over to Dave, who will provide greater detail on our financial results for the second quarter.

Thank you, Rob. During the second quarter of 2017, we have significant growth in orders and homebuilding revenue, while making further progress and many previously announced initiatives. I will first discuss our legacy business, then provide some additional color on UCP’s second quarter performance, which are not included on our reported results today. Pre-tax income for the quarter was $23.1 million, while net income increased by 13% to $14.8 million or $0.66 per share compared to $13.1 million or $0.62 per share in the prior year quarter. During the quarter, we incurred $916,000 of acquisition expenses or $0.02 per share. Adjusted EBITDA grew 24% to $31.6 million, compared to $25.5 million in a prior year quarter attributable to revenue growth. Home sales revenues for the second quarter were $287.6 million, an increase of 12%, compared to $257.2 million in the prior year quarter. This improvement in revenues was mainly driven by a 14% increase in average selling prices, which increased to $381,900 in the second quarter of 2017, compared to $334,900 in the prior year quarter. This was due to a shift in regional and product mix as well as core price gains. Home deliveries were 753 compared to 768 homes in the prior year’s quarter. Gross margin percentage on homes closed in the second quarter was 18.7%, compared to 19.2% in the prior year quarter driven by an increase in our financing costs. Excluding capitalized interest and purchase accounting impacts from cost of sales our adjusted gross margin percentage in the quarter was consistent with last year at 21.1%. As we look at our margin profile going forward, we recognize that over the next couple of quarters, we will see an impact from the addition of the UCP portfolio and the purchase price accounting impacts. Based on our prior experiences, we anticipate that in place UCP West will generate gross margins in the 6% to 10% range. We expect that inventory to roll through the system in two to three quarters. Excluding this one-time impact, we project that improved margin profile for the UCP portfolio both from land right down resulting from the below book value purchase price as well as the positive impact from our national purchasing and other initiatives. SG&A as a percent of homebuilding revenue declined to 11.9% for this quarter compared to 12.2% for the second quarter of 2016, which was a result of home sales revenue increasing 12% over the prior year, which more than offset our investments and personnel to support our growth and investment and new divisions. We expect continue to leverage our platform as our three start up operations Utah, Charlotte and financial services continued to grow and the integration of the UCP operations is completed. Looking at UCP’s second quarter performance, UCP had a good pace of activity led by the West with net new contracts growing 16% year-over-year to 265 homes. Home building deliveries were also strong with a 32% increase to 259 homes. UCP backlog of 412 homes was up 22%, which provides for a solid base of activity for Century to hit the ground running and our newly added West and Southeast communities. UCP ended the second quarter with a little over 7,000 owned and controlled lots. Stronger revenue resulted in USP’s home building gross margin expanding to 19.4%, compared to 18.2% in the prior year quarter. Adjusted gross margin improved to 21.8%, compared to 20.7% in the prior year quarter. And SG&A improved to 14.2% as a percent of home building sales compared to 14.4% in the prior year quarter. This all culminated in pre-tax income increasing 192% to $5.7 million and $2 million in the prior year quarter. Looking at a combined performance of UCP and Century on a pro forma basis, second quarter net new contracts would have grown 17% to 1,286 homes. Pro forma backlog increased by 26% to 1,778 homes. Home building revenue on a pro forma basis increased 18% year-over-year to $400.8 million. This improvement was primarily attributable to a 5% increase in pro forma home deliveries and a 13% increase in pro forma average selling prices to $396,100, because of favorable mix attributable to a 38% increase in deliveries from UCP markets in the West. Overall, these UCP and pro forma results are very positive and support our conviction that the planned addition of these assets under the Century brand should continue to flourish as we further improve operations in these well position communities. Now turning to our balance sheet and liquidity. In May 2017, we raised $395 million of net proceeds from a successful offering of senior notes due in 2025 that carried interest rate of 5% and 7%, 8%. We hit the portion of the net proceeds from this offering to pay down in full our revolving credit facility with the balance of the proceeds intended to fund the UCP acquisition. As of June 30, 2017, we had total long-term debt of $787.4 million and total liquidity of $763 million including $363 million of cash and the form availability of our $400 million revolver. Our net debt to capital ratio improved to 44.9% at June 30, and adjusted for the UCP transaction it would have approximated 50%. During the quarter, we issued approximately 383,000 shares under our ATM to $9.6 million or $25.06 per share. Tomorrow, we expect to complete our previously announced merger with UCP for a combination of stock in cash consideration. The cash portion of the deal expected the total approximately $98 million plus the payout of $153 million of debt. We’re trying to fund this through cash or hand. We will also issue 4.2 million shares of Century stock to UCP shareholders. This will result in Century shareholders owning roughly 84% of the combined company upon close. I will now discuss our updated outlook for 2017. We’re excited with the expanded scale of our business across the national footprint. Our updated expectations are for our combined business would reflect not only an increase to Century’s previously issued guidance, but the addition of UCP’s activity for a period from August 4 through the end of the year. We expect our full year deliveries to be in the range of 3,500 to 3,800 homes, and home sales revenues to be in the range of $1.3 billion to $1.5 billion, and we expect to have 110 to 120 selling communities at year end. While we typically do not provide guidance on a quarterly basis, there are a couple of moving pieces related to this transaction that will impact our third quarter and fourth quarter results. First, approximately 4.24 million shares will be issued to fund the UCP merger. And second, we anticipate one-time and acquisition related expenses of $8 million to $10 million, which will both would be recognized during the third quarter of 2017. Balance of 2017, we have a very strong pipeline for additional growth and look forward to integrating UCP into Century and leveraging best practices across the platform to expand our top and bottom line. Furthermore, we anticipate that we will generate meaningful synergies from national purchasing advantages and shared corporate expenses, which we expect will cause the transaction to be accretive in 2018. We’re pleased with our operating and financial progress to date as well as those of UCP, which will provide us with a strong platform to benefit from the exciting prospects of our combined businesses in years to come. Operator, please open the lines for questions.

We’ll now begin the question-and-answer session. [Operator Instructions] The first question comes from Jay McCanless of Wedbush Research. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. The first question I had – I didn’t hear what you guys said the reasons for the gross margin declined year-over-year in the legacy CCS business.

Hi Jay, this is Dave. The primary decline in the gross margin was due to financing costs, but if you look on an adjusted basis 21.1 versus last year 21.1. We’re still relatively consistent and then running between 21 and 22 on an adjusted basis, but the gross has been impacted by an increase in the financing cost.

Okay. And then what about – what should we build in for potential integration or M&A expenses for the back half of 2017?

Sure. This is Dave again. We had said that we expect about $8 million to $10 million, one-time and acquisition related expenses of which probably majority you’re going to see hit in the third quarter.

Okay, in the third quarter. And then the third question I had in Atlanta closings took a pretty big year-over-year, was not a weather issue or what’s going on there?

So it was really transitioning from close out communities to new communities. So during the quarter we closed out and opened 10 communities in Atlanta. And so as a result, even though we had the strong absorptions with sales, we didn’t have the spec inventory on the ground to get the homes closed. We look at that is, it was kind of a one-time event in Q2 as we transition from closing our communities to opening new ones and we don’t see that repeating itself going forward.

Okay. All right, that’s all I had. Thanks for taking my questions.

Thanks, Jay.

Thanks, Jay.

The next question is from Michael Rehaut of JPMorgan. Please go ahead.

Hey, good afternoon. This is [indiscernible] on for Mike. Just to start out with in your updated guidance I guess you didn’t have an updated gross margin outlook. I know there are some moving pieces with UCP. But I guess kind of looking at the historical spread between your margins and UCP’s there are some potential uplift there. So maybe could you add a bit on the puts and takes?

I’m sorry. Repeat the last part of that.

Yes, could you maybe – yes, add a little bit on the puts and takes for gross margin for the year UCP in there?

Yes. So it’s a little bit about the forecast kind of what it combined portfolio gross margin is going to be, but if you’re thinking about your model and you’re looking at it from the Century legacy business, the Century portfolio, I just made a comment to Jay, we’re looking at gross margins that – adjusted gross margins that continue to be around 21% number. When we’re looking at UCP, now there’s going to be some noise in the third and fourth quarter that based on our prior experiences as we look at purchase price accounting. What’s going to get reported on a gross margin basis is going to be in place with is going to have a margin of say 6% to 10% that are related in the third and fourth quarter. But on an adjusted basis when you factor that out, I think that UCP has been running 19%, 20%, and we think there’s some opportunity to move that up, but in terms of combined company guidance, I don’t think we’re in a position today to provide a lot of clarity on that.

Okay. That’s helpful. I guess in the context of that overall outlook, you’ve touched a bit on overall pricing, but I guess kind of drilling down to more specifically where are you seeing kind of the most pricing power. And then I guess how are you thinking about the current pricing front?

In general and this has been consistent really throughout the year. The pricing power we have is really on a subdivision by subdivision level as opposed to really across a market. We continually review our subdivisions. We are adjusting prices where we think the – we have the ability to do so. And as Dave said year-over-year our adjusted margin has been very consistent, which is reflective of the fact that as we have seen cost inputs increase. We’ve been able to raise prices to offset it. And we see nothing that’s changed on a go forward basis and we anticipate will continue to be able to do that.

Okay. Appreciate it.

Great, thank you, Neil.

Thanks a lot.

The next question is from Alex Rygiel of FBR Capital Market. Please go ahead.

Thanks. Nice quarter gentlemen and congratulations on UCP.

Thanks Alex.

Thanks Alex.

Growth has been fantastic over the last handful of quarters and years. Now you’re integrating a pretty big transaction with UCP. Are we going into a period here where maybe for two or three quarters, maybe a pull back a little bit focus internally, focus on integration, branding and so on. How should we think about that?

Alex, we’ve already started the integration process and we’ve integrated a number of companies already that we’ve acquired. And we look at UCP, it’s really in certain ways not a lot different than what we’ve done before. They are – they have a variety of markets. We have a plan that’s already in place, some of which has already begun and in terms of rolling out the branding terms of converting everyone to the same operating reporting platforms. So when we look at this, we had quite a bit of experience over the last couple of years with regard to the other acquisitions that we’ve done. So and frankly in this case, we had kind of a running start, because we had close to six months to get the plans in place where typically in a private company transactions they’re going to close much quicker and we don’t have it quite as much runway on the planning. So we’re very comfortable with the integration and think that we have a lot of opportunity to grow organically and that’s really where we’re focused, particularly in the UCP markets. In many cases, they haven’t had the capital to invest in their business and so we’re very excited about the opportunity to do that.

Secondly as it relates to raw material costs, any thoughts comments on that whether or not it’s lumber or other building materials?

Well, we’ve clearly seen over the last year arise in lumber costs and we’re still seeing in certain other commodities. But as we look at that we’ve been able to offset those costs with increased topline pricing growth. And as I said earlier, I mean we anticipate we can continue doing that going forward.

And then lastly, you mentioned Atlanta and Las Vegas were very strong. You brought up some more macro items that are helping those markets out. Anything in particular as it relates to company specific items that you think are driving some of the strength in Atlanta and Las Vegas.

Well, in Atlanta as I mentioned, we opened 10 new communities in the last quarter and we have quite a few more additional communities to open in Q3 and Q4 in Atlanta. And we’re just very bullish on the market – as the number two builder in that market, we’re continuing to grow within the market and we’re just from a prospect standpoint, we just see a lot of opportunity there. Shifting to Las Vegas, we have continued to go into lower price points within the Las Vegas market, that coupled with a demand increase some, we’ve had very robust sales in Las Vegas year-to-date.

Thank you very much.

Great. Thanks Alex.

You’re welcome.

The next question is from Nishu Sood of Deutsche Bank. Please go ahead.

Hey, this is actually Tim Daley on for Nishu. Thanks for the question. So my first one is just follow-up on Jay’s question around the gross margins, so there was the 60 basis points sequential decline in the second quarter, but in May, you had mentioned how you anticipated being – how being able to maintain a relatively stable gross margin from quarter-to-quarter throughout the rest of the year? Was this due to the Atlanta spec closing issue and if so should we kind of maybe re-coupled the trajectory on a legacy basis if we’re thinking of it that way for Century through in 3Q and 4Q?

Hey, this is Dave. I would say in the first quarter, we gave some commentary about trying to be around a 22 as we’re looking at backlog and then we’re coming out 21.1% today. So a little bit of a decline, but we really attribute that – more to just based on where the product and type of house that closed ultimately in Q2 versus what may have been projected earlier in May. We would with a 21% to 22%, we don’t see that as a material degradation in kind of margin. And so we think that staying there – staying within that range, going forward for the next couple of quarters for the legacy Century business into balance of 2017 is a reasonable expectation.

All right, very helpful there. And then I guess my second question, I was just trying to reconcile the updated guidance, which I guess UCP’s historical guidance, obviously no one holding you to what the prior company it said, but just from a capacity issue, I’m just trying to understand breakout what the difference between what the upgrade to the Century, our legacy is and versus kind of what is closing from UCP because obviously there’s a bit upside on the closings in revenue and that’s kind of unanswered there.

Yes. So this is Dave. So a couple things to consider when looking at kind of our increase in updated guidance for 2017. Had we done the guidance at beginning of the year? The pro forma guidance would have been in the range of 3,925 to 4,275 in terms of home closing at a $1.4 billion to $1.6 billion. However you got to keep in mind. I don’t get the count the full year for UCP, so we’ve got to take out seven months worth of activity. So if you breakdown the guidance a little further, we’re including an increase in Century’s legacy portfolio. There are regional guidance was 3,000 third party 3,300 homes and a $1.2 billion to $1.2 billion in revenues. We had a strong first half of the year, as we look at our backlog and we’re expecting at the second half from our divisions. We’re increasing the Century level guidance to 3,100 to 3,400 homes being delivered this year at $1.1 billion to $1.3 billion in revenue. The balance and to get to our updated guidance is related to the UCP portfolio, now what we did was they involved with guidance behavior of 925 to 975 on home closings. And essentially, we just adopted homes closed up through today, out of that number such that we did like the original range, we end up with 545, now we just took homes closed up both at low and the high end of the range to come up with in updated guidance. So we’re not updating UCP’s guidance today. We’re just adjusting it for actual activity up through this week.

All right. Thank you. That’s very helpful. And then I guess just to reconcile a bit further, you put out the statement with expecting the synergy, that I guess cost saving synergy of around I think it was $5 million, press release for full year 2018. Does that still hold and what do you think could happen during the rest of the year that you could surpass that? Thank you.

This is Dave. I’ll go first and down clean up anything you want to. We’ve said that $5 million was a kind of a starting point for us in terms of synergies, that when we look around that the combined portfolio we look at having now a national coast to coast footprints. That gives us a lot of purchasing power, a lot of synergies from an operational perspective that we think that hitting $5 million is good, possibly we go higher than that – that I think that where we talked about before Dale said in his prepared remarks $5 million to $8 million per year going forward. This year you’re not going to see very much of in 2017 because obviously it takes a while to work those into the system. But once we get up and going in 2018, if you think $5 million to $8 million number based on some of the synergies is fairly attainable.

So Tim, just to provide a little more color on that, we see so many synergies coming from the public company costs, the audit, the legal insurance, personnel, national purchasing. And so when we look at that as Dave said the – we originally put out to $5 million as we have continued to refine this. We think we’re going to be in the $5 million to $8 million range. Some of that we’re going to start seeing this year, but very little of it – most of it will started into 2018. And hopefully, we can build on it from there in future years.

Great. Thank you for taking the questions.

Thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, operator, and thank you again to everyone for joining us today. We look forward to speaking with you again next quarter.