Hudson Technologies, Inc. (HDSN) Q2 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to the Hudson Technologies Second Quarter 2018 Earnings 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]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Nesbett of IMS. Thank you, Mr. Nesbett. You may begin.

Good afternoon. On the call today we have Kevin Zugibe, Chairman and Chief Executive Officer; and Brian Coleman, President and Chief Operating Officer of Hudson. I’ll now take a moment to read the Safe Harbor statement. During the course of this conference call, we will make certain forward-looking statements. All statements that address expectations, opinions or predictions about the future, are forward-looking statements. Although, they reflect our current expectations that are based on our best view of the industry and of business as we see them today, they’re not guarantees of future performance. These statements involve a number of risks and assumptions, and since those elements can change, we would ask that you interpret them in that light. We urge you to review Hudson’s Form 10-K and other SEC filings for a discussion of the principal risks and uncertainties that affect our performance, and other factors that could cause our actual results to differ materially. Okay. With that, I’ll now turn the call over to Kevin. Go ahead, Kevin.

Good evening, and thank you for joining us. As we discussed in our first quarter call, our 2018 selling season commenced with a just in time buying model and we got off to a very slow start. Unfortunately, the selling environment remained sluggish through April due largely to the cool spring with price declines and stagnant demand impacting the refrigerants we sell plus the warmer weather commenced starting in May, we saw volumes rebound, and for the last two months volumes have increased and we’ve begun to close the gap, but we’re still behind last year’s overall volume pace. The Hudson-ASPEN team possesses enormous industry experience, but this year has presented unique challenges. While we’ve seen price and our volume declines in one refrigerant or another in the past seasons, this year we’ve seen declines in both volume and price for nearly all refrigerants. As a result, our second quarter performance was extremely disappointing, particularly due to the price decreases that occurred through June of this year. Now with the arrival of warm weather one month into the third quarter, we have seen a stabilization in prices. During the first four to five months of this year, there were several factors which have created significant headwinds, such as customer buying patterns, supply and demand levels and whether, all negatively contributing to our results. But once the warm weather kicked in for the entire country, we have clearly seen customers actively buying refrigerant to meet the demand. Unfortunately, we think this demand has come a little too late to reverse the negative pricing in volume trends that have occurred through the second quarter. In recent years, R-22 pricing has been increasing incrementally as we move closer to the 2019 production phase-out, which is anticipated to create a supply shortage for the installed base of R-22 equipment. This season, however, the pricing trend has reversed course. Based on our experience with HFC phase-out in the mid-90s, it’s not uncommon for pricing to move up and then come back down at times throughout the phase-out process. As we look to next year, we’re mindful that there will only be another 4.5 million pounds of virgin production allowed. We believe that this additional supply plus any remaining stockpile could fell short of meeting the overall demand, which is why similar to HFC phase-out, we expect to see higher, more stable pricing as normal supply demand economics will apply to R-22. We believe the customers change their typical buying behavior this year based upon their experience in the 2017 season and have been hesitant to stock inventory. Last season, our customers saw increased pricing early in the season followed by significant declines for all refrigerants towards the end of the season, which resulted in lower than normal margins. As a result, this year many of our customers adopted a just in time buying approach, keeping very little inventory, while demand in the latter-half of the second quarter improved with the warmer temperatures demand never reach typical second quarter levels. To give you a sense of the overall pricing dynamics, since our first quarter conference call in May, R-22 has declined to approximately $10 to $11 pound, and HFC pricing declined approximately 40% from the first quarter through the second quarter. Given these pricing headwinds and with two-thirds of our selling season complete and the visibility we have today, we don’t anticipate that we will be able to make up the shortfalls of the first and second quarter during the remainder of the selling season. Therefore, we don’t expect to meet the revenue and gross margin targets that we set forth in early May. Assuming refrigerant pricing remains at current levels, we believe our revenues for 2018 should be approximately $200 million. While we anticipate the 2018 selling season to be challenging, it certainly has proven to be even more difficult than we would have expected. We’ve been in this industry a long time and we’ve weathered difficult market conditions and remain optimistic about the long-term opportunities in the markets in which we operate. Our acquisition of ASPEN has added seasoned industry professionals, enhanced our portfolio of product offerings, and diversified our customer base, both of which strengthened our ability to navigate periodic downturns in our history. The depressed prices also allows us to replace our higher cost inventory with much lower cost basis product, which we believe will improve our margins as we begin to sell that product in future periods. The 2019 results are expected to make clear the strengths and benefits of the Hudson and ASPEN combination. We see many similarities between the current HFC phase-out and the CFC phase-out of the mid-90s. Our experience and success in navigating through the CFC phase-out taught us that price increases are not linear and often have corrections along the way. We are now in the middle of one of those price corrections and although R-22 pricing has trend lower in the short-term, over the longer-term for R-22, we expect to see significantly higher prices. Likewise, we expected phase-down of HFCs should follow a similar trajectory and we believe represents an even larger opportunity, as it will be a broader installed base of HFC equipment. Moreover, the Trump administration’s recent action to rollback vehicle emission standards should not in any way signal a lack of support for the Kigali Amendment since the dynamics of the auto efficiency issue is very different in Kigali. Support for Kigali in the industry is almost universal and there’s a – and there’s considerable support among Senate Republicans with more than a dozen already on record in support of Kigali and an HFC phase-down. As it relates to emission standards, the auto industry was seeking a uniform federal standard as opposed to a patchwork of state standards, whereas refrigerant industry is seeking – is actively seeking the phase-out. We have seen no evidence of any business group coming out in opposition to Kigali, consequently, we are confident that Kigali Amendment will be ratified. Lastly, we’re currently operating under a Waiver and Amendment to our term loan agreement, which runs through August 14. The discussions are continuing with our term loan lenders to secure an amendment of the term loans existing total leverage ratio financial covenant and certain other items, which we expect to complete an amendment on or before August 14. Subsequent amendment should provide us with enhanced financial flexibility to weather through today’s challenging market conditions. As we move through the remainder of 2018, our focus remains on meeting the needs of our customers and growing our leadership position to capitalize on future opportunities, as the industry involves the new equipment and refrigerants. Now I’ll turn it over to Brian to review the financials. Go ahead, Brian.

Thank you, Kevin. For the second quarter ended June 30, 2018, Hudson recorded revenues of $58.1 million, a 11% increase, compared to $52.2 million in the comparable 2017 period. The increase is primarily related to the acquisition of ASPEN Refrigerants, offset by price declines of $17.5 million and volume declines of $3.1 million in 2018, when compared to 2017 period. During the second quarter of 2018, we recognized $14 million inventory write-down due to a decline in selling price of certain refrigerants that occurred in the quarter. We also recognized an additional $18 million write-down for the previously recorded step up in inventory basis associated with the acquisition of ASPEN Refrigerants, which had previously been reflected as a non-GAAP adjustment. Due to the impact of these items, net loss for the second was $28.6 million, or $0.67 per basic and diluted share, compared to net income of $8.5 million, or $0.21 per basic and $0.20 per diluted share in the second quarter of 2017. Non-GAAP adjusted net income for the quarter, which excludes the impact of these write-downs was $0.2 million, or $0.00 per diluted share, compared to non-GAAP adjusted net income of $9.1 million, or $0.21 per diluted share during the second quarter of 2017. Adjusted EBITDA was $4.7 million for the second quarter of 2018, as compared to adjusted EBITDA of $15.3 million for the second quarter of 2017. A detailed reconciliation of these items is presented in today’s release. As Kevin mentioned, we are working closely with our term loan lenders to secure a waiver and amendment of our term loan that would waive compliance with the existing total leverage ratio covenant and provide new total leverage ratio covenants for the period ended June 30, 2018 through September 30, 2019. It should be noted that we had a leverage ratio violation as a result of the price correction and inventory write-ups. We are sourcing our debt and we still have significant availability within our working capital line. We appreciate the support we are receiving from our lenders in this process and expect to finalize an amendment on or before August 14. And as such we plan to extend the filing of our second quarter 10-Q to correspond with the anticipated amendment. During the first-half of 2018, we generated approximately $8.6 million in positive operating cash flow and paid down approximately $10.6 million of debt. We believe we should generate approximately $30 million of free cash flow in 2018 primarily from the reduction in inventory levels and a one-time tax benefit related to the recent tax law changes. As of June 30, 2018, we have approximately $37 million of availability in our revolving credit facility with PNC. I will now turn the call back over to Kevin.

2018 has been challenging, but this is not the first difficult selling season we faced. The ASPEN acquisitions strengthened our organization and with our combined longstanding experience, breadth of products and service offerings and our established and expanding customer base, Hudson remains a leader in the refrigerant reclamation business. We’re optimistic about the long-term market opportunity and are poised for growth as our industry moves towards the final production phase out of R-22 in 2019 and transitions to new technologies and refrigerants. Operator, we’ll now open the call for questions.

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Steve Dyer with Craig-Hallum. Please proceed with your question.

Thank you. Good afternoon, guys. I didn’t see a balance sheet in the release today and I’m not sure the extent to which you can comment or not. But I guess, generally interested in your inventory level. You obviously have the write-down in the quarter inventory and then debt level. And then, I guess, just assuming prices stay on this level, do you feel like you’ve taken an adequate write-down you don’t expect anymore?

Yes. So the reason that we don’t have the balance sheet included currently is due to the fact that, we’re delaying the filing of the 10-Q to coincide with the amendment. Ultimately, the way the amendment is constructed will affect possibly the way the balance sheet is constructed. So that’s really the reason at the moment that we haven’t included it. As it related to some of your questions, hopefully, get all the pieces. Inventory definitely is down, I mean, certainly it’s down because of write-down. But it also was down, as we probably previously stated, is our intention is to continue to sell out the inventory through this entire season and then begin to reload at the lower prices that are available today compared to what the price availability was at the fourth quarter of last year. So, as we also try to say relative to inventory, it is expected that reductions in inventory generates cash. And that’s part of why we were suggesting we should have $30 million of free cash flow this year. It’s really, because our intent is to lower the inventory balance. And certainly, back to the acquisition of ASPEN, we bought a fair amount of inventory in that transaction, and we were expecting to bring those overall levels down. As it release to, I think, the debt part of your question, the debt overall is $10 million lower this year than December. So that also has been an intent of ours, is to lower inventory and lower the debt in a corresponding fashion. So I think, I covered all the pieces of your question. But maybe I missed something, Steve?

Well, I guess, just lastly, if you had to take out the dollar value of the inventory and how that can move around with pricing. I mean, would you anticipate that from a volume or a pound standpoint, you kind of be where you want to be,call it, exiting Q3, since Q4 is generally pretty quiet. I mean, are you confident and kind of get through at all and take your medicine this year and set yourself up better for next?

Yes. No, absolutely, that is our expectation. That was our intent particularly in examining the write-down and working with BDO or independent orders through this whole process and also frankly, with our lenders as well.

Got it. I’ll just ask one fundamental question. Curious, so obviously last year with the price spike in 22, I think, we saw higher use of substitutes and a lot of our checks are suggesting that a lot of the dirty gas is coming back mix suggesting that there’s still use of substitutes. Is there likely here a possibility that a lot of those moves to substitutes are sort of permanent, because people realize that they could do it and I guess, get away with it, or do you still anticipate kind of 22 levels going forward to really ramp the way you had kind of always envisioned? That’s it. Thanks.

Well, I think, I’d say, we still believe really our projections of where it will go are the same, because actually the supply gas is going to be enormous, now the demand compared to where the supplies coming from. From reclaim, from any other sources, this convergence is going to go away very quickly here in any kind of stockpile, there’s a big gap there. So even with stock – with drop-ins just like the CFC phase-out and there were the – those meant to, there’s always a room for those. 22 by far is the best gas for the equipment. So the only thing pushing gas in the past was the differential in price 22 being so much higher. Some people would try taking a short cut, use less efficient gas and do the cheaper job for the customer. Right now, the differential is not that great. The performance capacity efficiency is so much better for 22. We’re buying the 22 much higher price and we never buy the dirty gas on in the system even HFC, certainly, not substitutes. So the growth in substitutes, we haven’t necessarily seen any kind of a spike. Will they be around? They’ll be around. They’ll always be around even in the past and the future. So there’s a big gap for the 22 phase-out for the 22 needed equipment, but there will be always something like a substitute as a percentage of the market, how big we just don’t know.

And maybe to add to, because we’ve had questions about those Hudson have capabilities of handling cross contaminated refrigerants? The answer is absolutely and we’ve had that technology since probably mid-90s. Possibly your channel checks have seen reporting, let’s say, higher percentages possibly that what we’re seeing. Certainly, the amount of cross-refrigerant we’re seeing today versus 10 years ago is higher, but it’s not significantly higher or it’s not significantly reducing our ability to reclaim refrigerants or get an yield of refrigerants. And also to the extent that there have been increases in returns across contaminated refrigerant. As part of our CapEx spend and globally handling reclamation, we do we have resources in that area as well.

Let me just – not to prolong the answer, let me just tell you, Steve. Cross contaminated growth, yes, and we’ve always said, it’s growing every year. But the main reason for that is the replacement equipment for 22 is 410A. So a contractor now has two types of gas he is using 410A and 22, very easy to get 410A in a 22 system or vice versa. So, yes, gas we knew would grow and it did. So we have a technology that splits them apart, it’s not necessarily – it does happen with substitutes in there too, but it’s not necessarily about a lot of the gas – when we have across contaminated gas, it’s just someone with the newer equipment 410A getting into 22.

Great. Thanks.

Our next question comes from the line of Gerry Sweeney with ROTH Capital. Please proceed with your question.

Good afternoon, Kevin and Brian. Thanks for taking my call.

Hey, Gerry.

Hey, Gerry.

Kevin, I think in the commentary you mentioned that you’re looking at I believe doing $200 million in revenue this year. Granted it’s a difficult market and things could shift around, but sort of implies a pretty good second-half of this year. Is this the ARI acquisition that they, just in time, they sell directly to the customers, so they have sort of elongated sort of season. Is that what’s going to drive the second-half?

Well, not necessarily, but it is that too for the fourth quarter. The difference really why we feel that is really this just in time compared to other years, we expect volumes for the third quarter to be absolutely stronger than they were third quarter last year. So as third quarter was heavy earlier season buying, people had inventory on their shelves, needed less in the third quarter. In the just in time model, what we’re seeing is, people don’t carry a lot, they’re going to need more in the third quarter, if it continues warm. So we expect volumes to be stronger this third quarter than last year. And then, yes, with the ASPEN acquisition, they’re stronger than we are in the fourth quarter because of the types of customers that they serve.

Okay. And that’s what my checks were showing were smaller buying patterns, but customers coming back more often. And some of my checks had said, they had not seen much of a drop off in the second-half of July into August of sales, which – which they traditionally have done so. Is that what you’re seeing as well?

Yes, it took it – that’s what I think, I said in the prepared remarks, we saw volumes start picking up in the latter part of the quarter, even certainly in July, where it was really slowed to come. And once the heat starts, Northeast drives an awful lot of sales. And we were actually not too warm until June. And now it’s been hot everywhere and we’re seeing the volume definitely increase. It’s hard to close the gap, but we’ve definitely – you made up a lot of ground. So, yes. And so we expect that to continue in the third quarter as long as it stays warm.

Okay. Obviously, we don’t have the balance sheet and cash items. But I mean, just by some quick calculations, I think, operating cash flow, you had a little bit of negative operating cash flow in the second quarter. And I think that was up a hair just based off of Q1 and just some numbers you gave on a six-month basis. Are you collecting a bunch of dirty gas, repositioning for next year and what are you paying for dirty gas?

So what’s happening now, let’s say, in the reclaim market, we’re paying around $5 a pound for the dirty gas. And to put into context, last year, we were paying $11 possibly or maybe a hair over $11 at some point. So clearly, to extent that we have reclaimers R-22 refrigerant, the dollars in the inventory will end up being half, let’s say, what they were last year just because of we were paying about half what we paid last year. The same thing could be said to though with regards to HFCs. HFC pricing probably hit bottom in mid-June-ish timeframe. And so we’re HFCs now and probably we’ll be continuing to buy them and we’re probably buying them 30% lower than we would have been buying them in the fourth quarter last year, give or take. So definitely, we’re buying inventory. We’re not trying to be aggressive in buying inventory right now. But more times than not the purchases are really going to benefit 2019 more so than would 2018.

Okay.

I’m sorry, that’s because of our FIFO inventory still going through…

Yes.

…the inventory we bought coming into this year with unfortunately volumes being lower than we expected.

Got it. Okay. I’ll jump back in queue. Thanks.

Our next question comes from the line of Aman Gulani with B. Riley FBR. Please proceed with your question.

Hey, guys, thanks for taking my question. I just wanted to clarify one thing. You said debt was $10 million lower, but you said that was from December. I just want to clarify that from the end of 2017 versus end of Q1 2118?

Yes, it was for the six months. The reported information we gave is a six-month trend.

Got it. Okay.

Not a quarter trend.

Got it. Okay. And then I see a $2.9 million non-recurring expenses. I wanted to get a bit more color on that?

Most of those expenses are coming from the – like the ASPEN transaction. So as we continue to wind down the transition, and we have previously shared with you all that we expected the last step of the transition to be completely in the second quarter than it was. We’ll probably have some residual expenses in the third quarter, but we don’t expect after that to have much more in terms of these non-recurring expenses primarily related to the ASPEN acquisition.

Got it. Okay, thanks for that. And then one more for me. Just can you give me a bit more color on how that DLA contract is progressing?

So DLA, again, it’s continuing down the path we thought. Their revenues were roughly just shy of $5 million for the quarter, which again is putting us closer to that run rate of $5 million a quarter run rate this year. That’s where we felt we would head, and that’s where it’s heading now.

Got it. Thank you. I’ll jump back in the queue.

[Operator Instructions] Our next question comes from the line of Paul Dircks with William Blair & Company. Please proceed with your question.

Hey, good afternoon, guys.

Hello.

Just a couple for me. First of all, you guys had mentioned HFC pricing to the quarter bottoming out mid-June. Perhaps could you talk to us a little bit about what those dynamics have been thus far in the third quarter and just some of the dynamics through this year? How did they trend relative to your expectations? And why are we so confident that the pricing bottom is in?

Well, we said in prepared remarks since probably mid-June, it appears all refrigerants HFCs 22 stabilized. Now we can’t say for certain that it’s solely due to weather, but certainly up into that moment in time possibly many companies in our industry, including Hudson had too much inventory and we’re looking to adjust pricing relative to that. Since we are getting lots of phone calls, someone commented and that’s the situation right now. No one is really making large orders. So they are calling very frequently. Price isn’t as much a discussion anymore, it’s more can you get the product here tomorrow kind of a thing. So to say that we could guarantee that we’re at the bottom, we can’t say that, for sure. But certainly, we’ve had a significant price correction. When you look at HFC prices specifically, we’re not at the all-time low relative to the pre-tariff days, but we’re not that far from it, we’re pretty darn close to it. And the pricing dynamic today, we think is such that, there’s a little bit more shipping and blending expenses in today’s environment versus what would have been back about three or four years ago. So we – it’s difficult to say guarantee-wise that we’re at the bottom. But we believe we are at the bottom and we’ve seen strengthening of price in the month of July as the warm weather is continued.

Got it. That’s helpful. Where exactly are HFC prices through July relative to last year July 2017?

We’re below all those prices. Now we’d probably never will cross, because we did get a price correction in HFCs and particularly 410A in the third quarter last year that was very severe. But we probably will this entire third quarter sell below that low.

Okay, that’s helpful. I appreciate that. And then just one more for me. A customer buying behavior perhaps thinking back to the last major cycle of depressed prices and then returning out of that cycle to more normalized buying behavior. When exactly in the following year after the last time of the depressed prices, did customer buying behavior normalize to where it wasn’t so much just in time? And do you sense that will have any view into that normalized buying behavior before next spring, or is this simply waiting around until August or – excuse me, April or May of 2017 talking a little bit more comfortable with what customers will be doing?

So it’s a good question and probably a little difficult to answer. With May have exacerbated this year more relative to the prior years is how cool it was for how long and particularly in the north and northeast season. So it is difficult to compare one season to another season and then say the past is a predictor of the future and so forth. We’ll go into the season spending a – probably a lot of time thinking about our inventory levels and managing that and trying to assess buying behaviors as best we can. But we’re probably going to be cautious about that based on how this year played out and the just in time model we’ve seen.

But in addition to that, the difference in this year, we really hadn’t seen, as Brian said, we hadn’t seen before where all the refrigerants primarily were affected. So the models we’ve looked at the – if we compare, we had a good feeling of when it starts leveling off. But that was usually one refrigerant had a problem, it wasn’t usually the group. And so you get the effect on, say, 22 because of HFCs, which is primarily what happened. To make margin someone had to start selling their 22 inventory, because they weren’t making it on HFCs. We hadn’t seen that before. But I think we feel comfortable with it that – Brian’s opinion is on it. But that was the biggest difference, I think, we haven’t – this isn’t exactly what we’ve seen before where they all were pretty much affected.

Got it. That’s helpful color. I appreciate it, guys. Thank you.

Our next question is a follow-up question from the line of Gerry Sweeney with ROTH Capital. Please proceed with your question.

Hey, guys, thanks for taking a follow-up. Thinking a little bit out loud here and trying to figure this out. So as we go through this season and we’re looking at FIFO inventory, you’re bringing dirty gas in at $5. At what point do you deplete your more expensive inventory and then start to sell his new gas coming in?

So there’s a slightly different answer between the Hudson normal inventory and then the inventory acquired from ASPEN. So as it would relate to Hudson, generally speaking, in any one particular season, we ought to be able to liquidate the inventory we bring into the year. Generally, our inventory turns, while they’re not significantly greater than one-time, they’re probably 1.4, 1.5, so in that kind of mid range. So we should deplete Hudson’s inventory this year, whether that be 22 or otherwise. The slight difference now, though, ASPEN and this was something we talked about and probably disclosed and really was originally related to that accounting we had to do with the step-up of basis and all the stuff was that, we did get more than a one year supply of 22 on the ASPEN’s books. But back to this whole accounting and step-up of basis, all that stuff is eliminated. And as a result, let’s just say, now their 22 has much more normal or realistic costing structure now that the accounting step up is gone.

So also on that front, does this step up on Q3, Q4 impact some of the – we were looking at some adjusted EBITDA and adjusted numbers. Does that go away now since that step-up has been written down essentially?

Yes, A lot of this accounting and trying to reconcile the non-GAAP is going to go away. Absolutely, yes.

Okay. Did I ask what price it was written down to? I mean, you said $10 to $11. I mean…

There’s two different things. So this step-up in basis is a very unique accounting nuance relative to allocation of the purchase price in an acquisition. It’s not really related to GAAP of going concern net realizable value concept. It’s an independent concept relative to redistributing the purchase price amongst the fair value. And back to that outcome, you’re kind of – it’s not precisely this, but you’re kind of forced to market up to market at the acquisition date, which you normally would do on a cost basis or a net realizable value. So you end up with a little perverse outcome, which is why we were – had been, in fact, trying to do a reconciliation between GAAP and non-GAAP,. because the outcome was not normal or perverse to some extent. But it is in accordance with GAAP, so.

Got it. And then one other question, then I’ll jump back in queue, if there’s another call. What’s your market intel in talking to people out there on the streets got abide what have you? I hear different things in terms of how much inventory stockpile is out there. Obviously, virgin R-22 is going to what, £2.5 million next year. And the market demand has got to be substantially higher than that. So you hear different things. People are selling R-22 at some cheaper prices for volume just to help out some other margins because they’re getting wacked on HFCs, things like that. Whether or not – how much of that is true, I don’t know. But curious if you could comment on any market intelligence in terms of how much inventory stockpile is out there, and what’s going to happen?

Again, we don’t have definitely, obviously, accurate numbers on what the stockpile is. From the best of our knowledge from talking to people, talking to really allocation holders, people who may have had some gas. We definitely think it’s significantly down, especially since there was good volume out there at one point because of trying to make up the difference on HFC. So we do think a good amount of it went out. How much of it is left? Hard for us to say. We can’t imagine a ton left. We haven’t heard that there is. We haven’t heard that it’s gone. But – and there has been enough supply. That’s why this industry certainly hasn’t been really running as a supply demand curve here, because again, there has been enough supply, and that’s because of the extra amount with the stockpile. When will that deplete? Hard for us to guess. But as long as someone has it, they’re not making money on HFCs. They’ll keep feeding this kitty here to try and make up the shortfall. And so we’ll know once it’s out, because probably prices will start coming back up on 22.

Got it. Okay. All right. I appreciate the candidness on that, too.

There are no further questions in the queue. I’d like to hand the call back to management for closing comments.

Okay. I would like to thank our employees, our longtime shareholders, those who recently joined us for their continued support. And thank you, everyone, for participating in today’s call, and we look forward to speaking to you after the third quarter results. Thanks.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.