DXP Enterprises, Inc. (DXPE) Q1 2018 Earnings Report, Transcript and Summary

Good afternoon. My name is Kym, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises 2018 First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Kent Yee, Senior Vice President and Chief Financial Officer, you may begin your call.

Thank you, Kim. This is Kent Yee and welcome to DXP's Q1 2018 conference call to discuss the results of our first quarter ended March 31, 2018. Joining me today is our Chairman and CEO, David Little. Before we get started, I want to remind you that today's call is being webcast and recorded and includes forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis are contained in our SEC filings. However, DXP assumes no obligation to update that information as a result of new information or future events. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release. The press release and an accompanying investor presentation are available now on our website at ir.dxpe.com. I will now turn the call over to David to provide his thoughts and a summary of the first quarter financial results.

Thanks, Kent, and thanks to everyone on our first quarter conference call today. We are off to a great start in 2018, and I will start off with a summary of my thoughts and Kent will take you through the key financial details. And we will aim to get all your questions answered through our prepared remarks and our Q&A session. After returning to significant sales growth in the second half of last year, our top priority is to sustain top line momentum and drive operating profits in 2018. This is our fifth consecutive quarter of sequential increases and we are going to aim at keeping this trend up. Let me thank all our DXP stakeholders, in particular, all our DXPeople for their hard work. Momentum is building in our business, and we are focusing on having a smart recovery. We are focused on growing the top line and bottom line as well as providing speed, quality and convenience for our customers and all stakeholders. Turning to our results. Total DXP revenues of $285.9 million for the first quarter of 2018 was a 7.6% sequential increase and a 19.9% increase year-over-year. This reflects continued improvement and stability in our end markets as well as the addition of Application Specialties, Inc., a leading metalworking and cutting tool distributor located in Auburn, Washington. This is the first quarter that Application Specialties has reported as part of DXP, and we are excited to have them as a part of the DXP family as ASI has great people who are customer-driven experts in metalworking solutions. For the first quarter, ASI contributed $10.6 million in sales. Adjusting for the acquisition of ASI, DXP sales increased 15.4% year-over-year and 3.7% sequentially. In terms of sales increase by business segment, I was pleased with the contribution of all 3 segments as we are seeing strength in our capital projects, MRO and OEM businesses. Innovative Pumping Solutions sales increased 37.9% year-over-year to $69.6 million, while Service Centers sales increased 17.9% year-over-year to $175.4 million and Supply Chain Services sales increased 5.3% year-over-year to $42.9 million. Overall, I am pleased with the growth, but it is great to see both sales growth and continued increases in our backlogs, especially within the IPS business segment. Innovative Pumping Solutions increase was primarily driven by modular packaging equipment for midstream onshore markets as the offshore markets are still soft. Sequentially, IPS experienced a 13.7% increase from Q4 of '17 to Q1 of '18 or an $8.2 million sales uptick. We continue to remain encouraged by the improvements in the IPS backlog, which has continued to grow into the first quarter of fiscal 2018. Trends in the IPS quarterly average backlog increased 80-plus percent from 2017 to 2018 and 8-plus percent from Q4 of '17 to Q1 of '18. The Service Centers sales growth was driven by increases in our Rotating Equipment, Metalworking and Bearing and Power Transmission product divisions. Within Service Centers, we saw particular strength in DXP's Southwest, Southeast and South Central regions. DXP's overall gross profit margins for the first quarter were 26.7%, a 32 basis point decline from Q1 of '17. However, adjusting for the acquisition of ASI, gross margins were 27% or essentially flat to the same period in 2017. I am pleased that we continue to work off the trough and our gross margins we experienced in the Q3 of 2017. In terms of ASI's gross profit margins, they are below DXP's average, but they produced operating income margins of 12-plus percent. The other factors that have impacted our gross profit margin: DXP's engineered-to-order business and DXP's safety service business in Canada have experienced slight improvements, but we are not where we want to be. And frankly, other areas of DXP compensated this quarter to the upside in terms of gross profit margins. Specifically, we saw strength in DXP's fabrication business at our 529 facility and increased margins in our private-label pump business. DXP's engineered-to-order business within IPS is still working through a reduced level of the complex, large high-margin orders and their overall cost absorption as they attempt to focus on more configured-to-order projects. In terms of DXP's Canada safety business, we are continuing to work through implementing price increases and adjusting our employee cost structure in order to make the gross margins we expect going forward. As we have discussed, this is the seasonal soft season in Canada and we expect to see progress on our efforts during the second half of 2018. SG&A for the first quarter increased $9 million versus Q1 of '17. As a percent of sales, DXP's SG&A declined 75 basis points going from 23.6% in Q1 of fiscal 2017 to 22.8% in Q1 of '18. That says similar to our Q4 commentary, SG&A reflects the growth and investment in our business and people. At the end of the first quarter, DXP had approximately 2,563 full-time employees. As always, it is my privilege to share DXP's financial results on behalf of these DXPeople, who work hard every day as one team, driving customer success and value creation. SG&A will increase as expected and reflect our investment in our people and our organization as we grow going forward. But as a percent of sales, SG&A will decline. DXP's overall operating income margin was 3.9% or $11.1 million, which includes corporate expense and amortization. This reflects a 45 basis point improvement in margins over Q1 of '17. That being said, we still have ways to go for full recovery. Service Centers operating income was 9%, while IPS and Supply Chain Services operating margins were 9.4% respectively. IPS operating income margins experienced the greatest increase, growing by 228 basis points year-over-year, driven primarily by improved gross margins. Service Centers increased operating income margins by 6 basis points, benefiting from the addition of ASI, which had a 12.3% operating income margin in the first quarter. Supply Chain Services operating income margins decreased by 52 basis points, driven by an increase in SG&A. Overall, DXP produced EBITDA of $17.9 million versus $15.5 million in 2017, a year-over-year increase of $2.4 million or 15.5%. EBITDA as a percent of sales was 6.3% versus 6.5% in Q1 of '17. Earnings per diluted share for the first quarter were $0.24 compared to $0.17 per share in the first quarter of '17, a year-over-year increase of 41.9% or $0.07 per diluted share. In summary, DXP delivered 19.9% sales growth, 15.5% EBITDA growth and 41.5% earnings per share. DXP and all our stakeholders remain excited about our future and a smart recovery as we move through fiscal 2018 as DXP believes our goal is to grow the top line and the bottom line at the same time as well as providing speed, quality and convenience for our customers and stakeholders. Before I turn it back over to Kent, I want to reiterate my excitement about the future and our capabilities to bring value to our customers, suppliers, DXPeople and shareholders. The first quarter was a great start of the year. DXP remains well positioned to benefit from the return to growth. DXP and all our stakeholders are fired up and excited about winning and growing as we continue to be customer-driven, partnered with great suppliers and take market share by being fast. With that, I will now turn it back to Kent to review the financials in more detail.

Thank you, David. Now turning to the first quarter financial results. Starting with our income statement. Q1 was a strong quarter for DXP and is a great start to the year. The Q1 2018 financial results reflect continued sales growth and marks our fifth consecutive quarter of sequential sales increases since Q4 of 2016 or our quarterly compounded growth rate of 5.2%. The first quarter performance was broadly in line with all of our key financial metrics and expectations. Total sales for the first quarter increased 19.9% year-over-year to $285.9 million. This does include the acquisition of Application Specialties, which we closed on January 1, 2018. Adjusting for the $10.6 million contribution in sales from ASI, organic sales increased 15.4%. Average daily sales for the first quarter were up 21.8% over Q1 2017 or were $4.5 million per day in Q1 2018 versus $3.7 million per day in Q1 2017. Adjusting average daily sales for ASI, average daily sales for Q1 increased 17.3%. Average daily sales increased 4.2% sequentially from Q4 2017. Both our industrial and oil and gas end market indicators continue to show strength. Notable businesses within our IPS segment, which experienced year-over-year sales growth include our configured to order, engineered to order and remanufacturing businesses. Regions within our Service Center segment, which experienced meaningful sales growth, include the South Central, Southwest and Southeast regions. The overall growth reflects what we are seeing in some of our key end market indicators in the first quarter including the rig count, U.S. oil and gas production, the metalworking business index and the PMI. These indicators continue to show strength and support for our customers and DXP. In terms of our business segments, all 3 experienced sales growth year-over-year, with IPS showing the greatest improvement, increasing 37.9%. This was followed by our Service Centers, which experienced 17.9% growth and Supply Chain Services with 5.3% growth. Adjusting the Service Centers for ASI, sales were up 10.8% year-over-year on an organic growth basis. Turning to our gross margins. Gross margins were essentially flat at 27% adjusting for the acquisition of ASI. ASI gross margins for Q1 were 18.9%. DXP's total gross margins reflect the slow progress we are making, but also the continued impact of our engineered to order and our Canadian Safety Service businesses. As we have discussed, these 2 businesses have put pressure on our gross margins. That said, both businesses continue to show improvement in Q1, but remain below our historical averages. And in Q1, there were supported by other businesses within the respective segments, thus compensating for the margin softness. We expect to see further improvement as we move throughout 2018. Sequentially, our IPS segment gross margins experienced a 238 basis point improvement from Q4. Sequentially, Service Centers gross margins declined 5 basis points or essentially flat to Q4 adjusting for the acquisition of ASI. Supply Chain Services gross margins declined 49 basis points from Q4. In terms of operating income combined, all 3 business segments improved 42 basis points in year-over-year business segment operating income margins versus Q1 2017. Total DXP operating income increased 35.4% from Q1 2017 to $11.1 million. IPS had the greatest uptick, improving operating income margins 228 basis points to $6.4 million of operating income; followed by Service Centers, which had a 6 basis point improvement to $15.8 million; and Supply Chain Services declined 52 basis points, primarily driven by increases in segment SG&A. Turning to EBITDA. First quarter 2018 EBITDA was $17.9 million, which was up 15.5% from Q1 2017. Our EBITDA margin expanded 31 basis points from the fourth quarter. Year-over-year EBITDA margin declined 23 basis points, primarily reflecting the decline in gross margins that we have discussed since Q3 of last year. The increase in EBITDA dollars primarily reflects the 40 -- the increase, excuse me, of EBITDA dollars primarily reflects the $47.4 million or 19.9% increase in year-over-year sales growth. As we move through the cycle, we should experience continued operating leverage as long as we continue to drive organic growth and steady improvement in our gross margins. In terms of EPS, our Q1 net income was $4.6 million. This is up $1.4 million or 45.3% over Q1 of last year. Our earnings per diluted share for the first quarter was $0.24. Turning to the balance sheet. In terms of working capital, we are comfortable with where the numbers came out. Working capital as a percentage of last 12 months sales for the first quarter was 17.4%. This is above our historical average of 15.4%, but remains within our targeted ranges and reflects investments in our business. The main driver of the increase in working capital as a percentage of sales was inventory. Inventory increased $11.8 million from the fourth quarter. This was primarily due to a $3.3 million addition from ASI and a $2 million increase in finished goods and another $6.2 million increase in [indiscernible]. In terms of cash, we have $13 million in cash on the balance sheet at March 31, net of the outstanding checks. In terms of CapEx, CapEx in the first quarter was $791,000 or 0.3% of first quarter sales. Compared to the same period in 2017, CapEx dollars are up $190,000. The increase reflects minimal investments needed within our core distribution business and our ability to manage cash. That said, DXP is making investments in software to enhance our sales efforts, facilities and improvements to future supercenters and our corporate operations. Return on invested capital, or ROIC, remains stable at a strong 17% and continues to be above our cost of capital, but it does reflect our dampened profitability levels. In terms of our capital structure, we have 2 main covenants under the ABL and term loan B, including the fixed charge coverage ratio and secured leverage ratio. At March 31, our fixed charge coverage ratio was 3.4:1 and our secured leverage ratio was 3.4:1. In conclusion, we are pleased with our ability to have 5 sequential quarters of sales increases, as David mentioned, EBITDA growth and room for improvement in terms of operating leverage and significant diluted EPS growth. I would like to emphasize that we continue to take deliberate actions to position and support the evolution of our strategy, while continuing to thoughtfully allocate capital to capture and support profitable growth in the short and long term. This will be a smart recovery. Now we will turn the call over for questions.

[Operator Instructions] Your first question comes from Matt Duncan from Stephens Inc.

This is Will on the call for Matt. Yes, I wanted to start with the strong sales trends through the quarter and through April on a monthly basis. Have you seen trends strengthen or can you kind of touch on that within the quarter?

Yes. No. Sure, absolutely, Will. This is Kent. I can just walk you through the sales per business day through the quarter and then include April. So sales per business day in January were $4.2 million, $4.4 million, $5 million, $5.1 million in March. And then April was $4.6 million.

Okay, great. That's helpful. And then just flipping over to IPS in particular, great to hear that backlogs are continuing to build. Do you think or expect that, that will translate to further sequential growth from this high 1Q watermark throughout the year? Or how should we be thinking about the trend there as we move throughout 2018?

I'll answer that. The activity in terms of completing ducts, drilling activity is pretty reasonable. There are a lot of pipeline projects to move product from these old fields to the coast or wherever they need to go. We really – we don't see any slowdown in activity, so we would expect IPS to continue to grow. We would – it would really be also that if you could get our offshore industries going and that would help with our engineered-to-order stuff, the stuff that's more complex and have higher profits and we're still pursuing some of that stuff and we do land a few orders here and there with normally on the smaller side. We really need the offshore business to pick up. The onshore business is strong and continuing to be strong and we don't see any reason for that not to be the case. I mean, we'll make this the one argument I always make and that's the perfect price of oil and that's where the industrial market is okay, and then have to pay too much at the pump or pay too much for cars and all that kind of good stuff. And yet, it's enough money that the old companies make money. And so I think we're there. I think, frankly, I don't see price of oil get too much higher.

That's helpful, David.

That was a long answer.

That was helpful. Then you spoke to it a little bit. But going back to the gross margin pressures in Canada and IFS, can you speak more about the wage negotiations up there? Had your customers been pushing back on the wage increases more than you had expected? And then looking forward, when do you expect gross margin levels to start to improve on a year-over-year basis?

I do think the pushback has been stronger. The Canadians, they don't make as much money on the oil sands as we make in the States. But, so they're very cautious in their expenses. Not that everybody is not cautious of the expenses. Let me, I mean, one of the reasons why we make, the whole time we make money at $60 a barrel is because we've all cut our costs. The question becomes Canada also has a very social base to it and employment is reasonable up there, so it's been hard to pushback on the employees also. So yes, the pushback from the customer has been there, the pushback from the employees has been there. And yet, we're not a profit organization here. So we have to figure all that out and we are, but it's been a slower process than I had hoped.

The only other thing I would add to it is we did see on an organic basis, I'll just reemphasize it from our comments that gross margins were 27.04% adjusting for ASI and so you did see sequential improvement. Now we do have a huge comp, if you will, from a gross margin perspective year-over-year. I think Q2 last year gross margins were 27.5%. So I think it's fair to kind of be measured here in terms of expectations going forward. But we are seeing gradual improvement, probably not at the pace we'd like, but we are seeing some. So…

Okay. That's helpful, Kent. And then last thing from me, are you continuing to pursue some more bolt-on deals here and expect to see more acquisitions across the finish line throughout this year?

We always have discussions ongoing and it's our goal to kind of hopefully get a few other ones done, but it's always a hard time when sellers will say yes to our compelling offers.

I like those compelling offers.

Your next question comes from the line of Joe Mondillo from Sidoti & Company. Your line is open.

Wanted to ask about the Service Center margins. I was wondering how they sort of stacked up against your expectations and they seemed a little bit light for me and they were a little lighter than the last few quarters. So wondering your thoughts there? And sort of how, looking at that margin that went up in the first quarter, how that sort of stacks up against your expectations for the rest of the year?

Joe, are you referring to the operating income margins or just talking to the same...

Yes.

Yes. I think, yes. I think some of that just reflects first part of the year and usually sometimes some higher than usual expenses. I know in Q1 we had a few extra payrolls and so I think that may have dampened our margins ever so, slightly on the SG&A side, but I think we feel good in terms of where they're at, at this point. So I don't know, if David has some comments.

Well, Joe, I think IPS margins are too low. I think Service Center margins are too low. And I'm probably after John to actually lower Supply Chain Services margins a little bit because I'd like to see more top line growth. So I'd like to see him being more aggressive on new orders. But yes, we're back into growing scale and we're back into -- we've had to give people raises that haven't had raises in a while. And I mean, there are things that are going on. It's been a buyer's market, not a seller's market. So therefore, our gross margins are too low, et cetera. So we're working on all that. Our gross margins need to come up. Leverage will take SG&A as a percent of sales down, and we have to be north of 10% operating income.

So the operating income at that segment -- I mean, it was close to 10%. And so I'm just wondering, do you think you can get to that 10% plus level this year or is it going to take -- are we going to have to wait till 2019 until we surpass that 10% levels that we've seen in the past?

Yes. I'm pretty convinced that we should see -- Service Centers really don't have much of a reason not to hit 10% operating income, whether or not we can get -- I think it's peak somewhere, maybe a little north of 11% or so. So that may take a little longer, but we should be able to get to 10%.

Okay. And can you remind me of the seasonality of Service Center just on the margin perspective?

Yes. Once again, part of that -- I was going to jump in there, Joe, is impacted by our Canadian Safety Services business. So once again, as we work through the gross margin pressures in our Canadian Safety Services business, which is in our Service Centers segment, we should see some lift across the board, including on operating income line. There is seasonality. To answer your question directly, it's usually Q4, sometimes early Q3, just a bit about when winter hits and it gets cold in Canada.

No, no, no. The breakup is when the activity level goes down because people can't -- they can't get into the field. It's too wet. So it's actually the reverse. Once Canada starts falling out, then it needs to dry out and then it's good. It's good when it's frozen.

That's Q3, Q4.

Or up.

Yes. That's what I'm saying.

Okay, I'm sorry. I thought you were commenting that they were down. Okay, I'm sorry.

All right. And then I was wondering you gave the daily sales per month and just wondering your thoughts about the sequential tick down from March to April. What your thoughts are on that?

Yes. Our business seems to build as the month goes on and it also builds from the months to the end of the quarter.

Joe, if you look at our Q1 2018 average that was $4.5 million. So to be a little bit directional, April coming out to shoot at $4.6 million is -- we're comfortable with $4.6 million.

Okay. And then you spoke on the last call about the IPS backlog. Just wondering, is that continuing to sort of ramp-up sequentially? How strong has the order trends been there? And then I also wanted to ask in terms of ISS, are we starting to see any of that large project backlog at all? I know you were trying to diversify and trying to win some business on the smaller side, but just wondering how strong the environment is if you're starting to see any of that high-margin large project type work?

So, I think we got a couple of million dollar order the other day that -- that required engineering that went with it. We say engineered to order, it's where we engineer the process, the whole, the equipment, everything. But the more that we engineer and change the molecules and stuff in terms of what we're dealing with. But that business is not particularly coming back. It was mostly offshore and overseas and we're not seeing a lot of that. We get a little bit of it – I just mentioned that. So we've had to go to onshore stuff, which is not as complex. The customer doesn't need us, the engineer, the project. And therefore, we don't make as high gross profit margins. And that particular part of the business is really good by the way. I mean, that's why all of IPS is growing along with our pump business to the pipeline people and stuff.

All right. So in terms of the order trends, it sounds like the order trends – I mean, you talked about how backlog was growing sequentially every month on the last call. Could you just talk a little bit more about how the backlog is trending? And then the margin was better than I was looking for in the quarter, even if you are not seeing these large high-margin projects come back. So if that doesn't come back, where do – they were strong in this quarter. Where do you think they could go? We're already close to 10% up margins at IPS.

Right. So again, we feel like IPS will, in fact, go to 10%, just say this year. But it's not going to go back to the days, Joe, we remember when it was 15%, 16% because we're missing that offshore work. So the – and the backlogs though of the – I don't want to describe it as bad business because it's good business. Obviously, if we make 10% operating income on this business or eventually get to 11% or whatever, I mean that's good business. So it's not as good as it once was because of the complexity of the orders and et cetera, and the margins we used to get. But it's still good business. And so that business is growing and it's grown – it really is a charge. I mean, it's grown every month and it's continuing to do so.

All right. And then, just lastly, I just wanted to ask about the tax rate. I think you said last – on the last call that you were expecting 28% to 30% for the year and it came in below 27% for this quarter. So just wondering what your updated thoughts are on the effective tax rate for the year?

Yes. No, Joe. We were thinking that based upon the limitation on the deductibility of interest expense that maybe we would've ended up a little bit higher. But obviously, we made some income to the upside. So that impacted the assumption a little bit. And then there was a onetime rate change in Canada, not that we adjusted for. That kind of brought us down. Long winded way of getting that, the only revised thinking I'll probably give there is probably, we're probably closer to that 28% range, again, call it 28% to 30%.

[Operator Instructions] Your next question comes from Steve Barger from KeyBanc Capital Markets. Your line is open.

This is Ryan actually. Just wanted to go back to the operating margins at IPS, real nice performance there. And I'd like to think that they exceeded your expectations or at least came in at the high-end. But I believe on the last call, you hinted towards more significant improvement in the back half of '18. Does that belief still hold, given the performance you had in 1Q?

I believe that comment has to do with, more with the Service Centers because that's where our safety business is at. And our safety business normally has pretty high gross profit margins that dribbles down into operating income margins. So Canada is stronger in the second half of the year than it will be during the first half when they are looking for the meltdown, what is, Canada goes through, it's unimportant. But any way, so that has more to do with Service Centers. IPS is a little bit of a, it's not a little bit, it's you are bidding against 3 people, 4 people that are hungry, their shop is empty, they need to absorb overhead. And so therefore, it's a buyers' market versus today where, those times we just went through them. And so now today, the customer is more concerned. Well, can you deliver this in 10 weeks? And somebody goes, well, I'm pretty busy right now, so I can, but I'm going to charge you more or something. So it's just a different market and those big capital projects are going to be sensitive to delivery points. And so deliveries are going out and the people that can get the equipment out are going to make more money. So margins will creep up.

Okay. All right. And then going back to IPS, you guys have been having real nice growth for about 3 quarters now. Just curious, do you think you're gaining share with your private-label pump? And to piggyback on that, when should we expect to see the benefits from the aftermarket business start to come through with that offering?

How did you know I wasn't getting that already? But anyway -- you are totally correct on that. It's one of my core subjects, by the way. But we're putting a lot of equipment out there and so the -- we make more money in the pump industry, people make more money on aftermarket. So we're pushing for that and that is growing. It's about 10% of new pumps -- about 10% of our pump business is kind of aftermarket. So if we can get that up to -- you don't want it to be more than pump sales because that means you're going to die. But if you get it up to 40%, we would in fact make more money. So it's a really good point. When will that get better? Well, it's already getting better, but it's never fast enough, I guess. That was a good point. And you asked another question, I forgot what it was. You remember, Kent.

Just asking about the customer traction you're getting with your private-label pump. Do you think you're gaining share?

Yes. So we're extremely pleased with that. Again, I don't know that Made in America means a whole lot, but what does mean a whole lot is that we're fast, we control our supply channel, we have our own casting facility, we don't have to wait for something to get shipped for 30 days from China to America. All of that means speed and speed is important today. So speed oftentimes means way more than the cost of that pump. So we're happy about that, and we have gotten tremendous success and traction and we're doing really good. And it's growing -- it's just -- it's growing every day.

Good to know. And then just 2 more for me. Can you just give an update on the pricing environment? What kind of price increases are you seeing from your suppliers? And is the conversations with customer to push those through starting to become easier? Are you able to push through more price?

So I think we're -- okay, so I think we saw a lot of normal price increases. Normal meaning, kind of back to normal times versus the last couple of years where we didn't see a lot of price increase. We're now seeing the 3% and 4% price increase. And then I'm -- I kind of want to report this. I think this is important. We don't -- we're not seeing price increases because of the tariffs on steel and aluminum, and I think that's because we haven't -- our competitors and people that are doing stuff overseas in China and et cetera, were not putting the tariff on components. So it's just the bulk steel and the bulk aluminum, and we don't use a lot of that. So we're not seeing much in the way of price increases there, even though I hear of others that are getting the 15% to 20% price increases. So I just throw that out that we're not really -- we're not in that market that causes us difficulties there.

Okay. And then last one for me. Can you give an update on your upstream business? Are you hearing positive anecdotal commentary from your customers in regard to well completions or well activity in the basins, primarily in the Permian?

So I think we all know about the Permian, and it's kind of mecca place for oil and gas companies. And they have infrastructure. They just – they have quantities of oil, et cetera. So they make money there at a very low price point. But at the price points, I think more important to us is that's good, that's great. But at the price points we're at now, we really see Eagle Ford project starting to pick up. We see Bakken project starting to pick up. And there is activity in Canada. It's just not as robust as we would like for it to be, but there's profits there and our pump company in Canada is doing an excellent job and they make money on the volume that is there. They have A - they do have the East Coast of Canada also, which is industrial. So that part's been good and is still good. So we're – yes, we're happy with what's going on. Like I said, my biggest fear really is that oil and gas gets overheated. That's – because if that happens, last time I checked, 45%, 50% of our business is still industrial; it doesn't have anything to do with oil and gas. So we're happy about that too and there's this perfect price. Well, that's doing good. And oil and gas guys are doing good. We're are all happy.

I appreciate the time. Thanks.

Thank you.

There are no further questions. This concludes today's conference call. You may now disconnect.