McGrath RentCorp (MGRC) Q3 2015 Earnings Report, Transcript and Summary

Welcome to the McGrath RentCorp Third Quarter 2015 Conference Call. At this time, all conference participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] This conference is being recorded today, Thursday, October 29, 2015. Now, I would like to turn the conference over to Geoffrey Buscher of SBG Investor Relations. Please go ahead, sir.

Thank you, Operator. Good afternoon. I am the Investor Relations Advisor to McGrath RentCorp, will be acting as moderator of the conference call today. On the call today from McGrath RentCorp are Dennis Kakures, President and CEO; and Keith Pratt, Senior Vice President and CFO. Please note that this call is being recorded and will be available for telephone replay for up to 7 days following the call by dialing 1 (888) 203-1112 for domestic callers and 1 (719) 457-0820 for international callers. The conference ID for the call replay is 159257. This call is also being webcast and will be available for replay. We encourage you to visit the Investor Relations section of the company’s website at mgrc.com. A press release was sent out today at approximately 4:05 p.m. Eastern Time or 1:05 p.m. Pacific. If you did not receive a copy but would like one, it is available online in the Investor Relations section of our website or you may call 1 (206) 652-9704 and one will be sent to you. Before getting started, let me remind everyone that the matters we will be discussing today that are not truly historical are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding McGrath RentCorp’s expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements are based upon information currently available to McGrath RentCorp and McGrath RentCorp assumes no obligation to update any such forward-looking statements. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to McGrath RentCorp’s business are set forth in the documents filed by McGrath RentCorp with the Securities and Exchange Commission, including the company’s most recent Form 10-K and Form 10-Q. I would now like to turn the call over to Keith Pratt.

Thank you, Geoffrey. In addition to the press release issued today, the company also filed with the SEC the earnings release on Form 8-K and the Form 10-Q for the quarter. For the third quarter 2015, total revenues were flat at $113 million, compared to the same period in 2014. Net income decreased 1% to $13.6 million from $13.7 million and earnings per diluted share increased 2% to $0.54 from $0.53. Reviewing the third quarter results for the company's Mobile Modular division compared to the third quarter of 2014. Total revenues increased $6.9 million, or 15% to $53.1 million, due to higher rental, rental-related services revenues, partly offset by lower sales revenues. Gross profit on rents increased $5.8 million, or 49% to $17.7 million. Rental revenues increased $4.7 million, or 19% and rental margins increased to 59% from 47% as depreciation as a percentage of rents decreased to 16% from 17% and other direct costs as a percentage of rents decreased to 25% from 36%. Selling and administrative expenses increased 8% to $11.8 million, primarily due to higher allocated corporate expenses. The higher gross profit on rental and rental-related services revenues partly offset by lower gross profit on sales revenues and higher selling and administrative expenses resulted in an increase in operating income of $5.6 million or 86% to $12.2 million. Finally, average modular rental equipment at original cost for the quarter was $678 million, an increase of $71 million. Equipment additions supported growth across all regions and our portable storage business. Average utilization for the third quarter increased from 73.3% to 76.7%. Turning next to third quarter results for the company's TRS-RenTelco division, compared to the third quarter of 2014. Total revenues decreased $3.4 million or 11% to $29.3 million, primarily due to lower rental and sales revenues. Gross profit on rents decreased $2.9 million or 24% to $9.3 million. Rental revenues decreased $2.9 million or 11% and rental margins decreased to 41% from 48% as depreciation as a percentage of rents increased to 44% from 40% and other direct costs as a percentage of rents increased to 15% from 12%. Selling and administrative expenses decreased point $0.4 million, or 7% to $5.4 million, primarily due to lower allocated corporate expenses. As a result, operating income decreased $2.8 million or 29% to $7.1 million. Finally, average electronics rental equipment at original cost for the quarter was $268 million, an increase of $6 million. Average utilization for the third quarter decreased from 62.5% to 61%. Turning next to third quarter results for the company's Adler Tanks division compared to the third quarter of 2014. Total revenues decreased $1.2 million or 5% to $24.5 million, primarily due to lower rental and rental-related services revenues, partly offset by higher sales revenues. Gross profit on rents decreased $1.9 million, or 16% to $10.3 million. Rental revenues decreased $1.3 million, or 7% and rental margins decreased to 59% from 65%, as depreciation as a percentage of rents increased to 23% from 21%, and other direct costs as a percentage of rents increased to 18% from 14%. Selling and administrative expenses increased $0.4 million, or 7% to $6.9 million, primarily due to increased marketing and administrative expenses. As a result, operating income decreased $2.1 million or 30% to $5.1 million. Finally, average rental equipment at original cost for the quarter was $306 million, an increase of $11 million. Average utilization for the third quarter decreased from 62.7% to 58.6%. On a consolidated basis, interest expense for the third quarter 2015 increased 2% to $2.4 million from the same period in 2014. As a result of the company's higher average debt levels, partly offset by lower average interest rates. The third quarter provision for income taxes was based on an effective tax rate of 39.5%, compared to 39.2% in the third quarter 2014. Next, I’d like to review our 2015 cash flows. For the nine months ended September 30, 2015 highlights in our cash flows included, net cash provided by operating activities was $100.6 million, an increase of $15.7 million compared to 2014. The increase was primarily attributable to decreased prepaid expenses and other assets, partly offset by lower income from operations and other balance sheet changes. We invested $104.9 million for rental open purchases, compared to $113 million for the same period in 2014, partly offset by $19.7 million proceeds from sales of used rental equipment. Property, plant and equipment purchases decreased $1.1 million to $8 million in 2015. Dividend payments to shareholders were $19.7 million and the repurchase of the company's common stock totaled $48.8 million. The company began repurchasing shares in March under 2008 Board of Directors repurchase authorization for up to 2 million shares. In August, the company's board authorized repurchase of an additional 2 million shares. Year-to-date through October 28, the company repurchased 2.33 million shares with an aggregate purchase price of $61.8 million and an average per share price of $26.51. As of October 28th, 1.67 million shares remain authorized for repurchase. Net borrowings increased $59.6 million from $322.5 million at the end of 2014 to $382.1 million at the end of the third quarter 2015. With total debt at quarter end of $382.1 million, the company had capacity to borrow an additional $147.9 million under its lines of credit and the ratio of funded debt to the last 12 months adjusted EBITDA was 2.26 to 1. For 2015, third quarter adjusted EBITDA increased $0.6 million, or 1% to $47 million compared to the same period in 2014, with consolidated adjusted EBITDA margin at 42% compared to 41% in 2014. Our definition of adjusted EBITDA and the reconciliation of adjusted EBITDA to net income are included in our press release for the quarter. Turning next to 2015 earnings guidance, our 2015 full year earnings guidance range remains unchanged at $1.55 to $1.65 per diluted share. Now I would like to turn the call over to Dennis.

Thank you, Keith. Now, I’ll take a closer look at each rental business for the quarter. Modular division-wide rental revenues for the quarter increased $4.7 million or 19% to $30.2 million from a year ago. This is the 10th consecutive year-over-year quarterly rental revenue increase for our modular division. During the third quarter, we experienced a 6% increase in division-wide year-over-year first month's rental revenue bookings for modular building compared to exceptionally strong third quarter 2014 booking levels. We also continued to see rental rates rise for various sized products as demand exceeds readily available supply. Modular division average and ending utilization for the third quarter 2015 reached 76.7% and 77.9%, respectively, an increase from 73.3% and 74.2% a year ago. This is the highest modular division third quarter average utilization level since 2008. Modular division income from operations or EBIT for the quarter increased to $12.2 million, or by 86% from a year ago. EBIT margin for the quarter increased to 23% from 14% last year. This strong increase in profit was driven primarily by higher rental revenues and rental revenue margin expansion. Gross margin on rental revenues increased to 59% for the quarter from 47% a year ago. Direct costs associated with readying equipment and inventory center operations as a percentage of rental revenues decreased to 25% from 36% for the same period a year ago. During the quarter, we tightened down our spending for various building preparation and related inventory center operations. As utilization has risen in various product categories and geographies, we're more selective on rental opportunity project choices, overtime hours, supply expenditures and building preparation for future time period. During the quarter, modular division EBIT results also benefited from higher profit on rental related services, offset by higher SG&A expenses and lower profit on equipment sales from last year's quarter. Our higher SG&A cost were primarily related to increased sales and operations staffing levels to support the recovery of our modular rental business as well as the continued expansion of our portable storage rental business. Now let me turn our attention to TRS-RenTelco and their results. Rental revenues for TRS-RenTelco, our electronics division, declined by $2.9 million or 11% to $22.6 million from a year ago. The year-over-year reduction in rental revenues was driven entirely by lower communications test equipment business activity. We continue to experience a significantly slower wireless communications network upgrade environment compared to the first nine months of 2014. General-purpose test equipment rental activity, as measured by rental revenues for these products, was higher during the third quarter as it has been throughout 2015 compared to 2014 level. EBIT for the quarter declined by $2.8 million, or 29% from the same period in 2014. The reduction in rental revenue of $2.9 million was the primary contributor to lower year-over-year EBIT along with higher laboratory cost and lower gross profit on equipment sales, partially offset by lower SG&A and depreciation expenses. The higher percentage drop in year-over-year EBIT at 29% compared to rental revenues at 11% is primarily due to equipment mix and depreciation expense typically making up between 70% to 75% of direct rental costs. In other words, within any given quarter, we only have a limited amount of variable cost associated with rental revenue generation that can easily and responsibly be taken out of the business. In particular, with communications test equipment having much shorter depreciable lives than for general-purpose test equipment, there is significantly higher monthly depreciation expense, but also much higher rental rates than for general-purpose test equipment. As a result, when communications test equipment is underutilized, it impacts profitability more significantly than for general-purpose test equipment due to its higher carrying costs without its matching higher rental rates and revenues. Average equipment utilization was 61% for the quarter, compared to 62.5% for the same period in 2014. Average rental rates for the third quarter of 2015 declined by 11% to 4.62% from 5.2% a year ago, primarily due to the on-rent equipment mix increasing for general-purpose and decreasing for communications test equipment. General-purpose test equipment has longer depreciable lives and lower rental rates than communications test equipment. Now let’s turn our attention to Adler Tank Rentals and their results. Rental Revenues at Adler Tank Rentals, our liquid and solid containment tank and box division, decreased 1.3 million, or 7% to $17.4 million from a year ago. Adler Tank Rentals serves a wide variety of market segments including industrial plant, petrochemical, pipeline, oil & gas, waste management, environmental field service and construction. Average utilization and total original cost of rental equipment were 58.6% and $306 million, respectively for the third quarter of 2015 compared to 62.7% and $294 million a year ago. Third quarter average equipment on rent at original cost was $179 million compared to $184 million a year ago, and we ended the period at $175 million. Average monthly rental rates also declined to 3.25% for the quarter from 3.39% in 2014. The reduction in both utilization and rental rates from a year ago is directly related to lower crude oil prices and the significant decline in wellhead related drilling and completions activity. These dynamics have put increasing downward pressure on 21K multi-purpose tank utilization and rental rates in upstream, midstream and downstream energy sectors, as well as in other market verticals. Keep in mind our 21K tanks are multipurpose product and are the primary containment source utilized in virtually all market verticals from groundwater collection to fracking to ethanol glycol or the icing fluid storage. We remain cautious in our outlook for our liquid and solid containment rental business for the foreseeable future as market forces drive a material reset of both the oil and natural gas industries. Adler Tank Rentals EBIT for the quarter decreased $2.2 million, or 30%, to $5.1 million from a year ago. The higher percentage decrease in EBIT at 30% as compared to rental revenues at 7% was primarily a result of higher equipment processing costs, increased SG&A expenses associated with a larger sales organization and higher depreciation expenses, all from a year ago. Now let me take a moment and update everyone on our portable storage business. Mobile Modular portable storage continued to make good progress during the third quarter in building its customer following, increasing booking levels and growing both rental revenues and profitability from a year ago. First month's rent booking levels and rental revenues for the third quarter grew by 37% and 29%, respectively, from the same period a year ago. EBIT for our storage container rental business was up twofold from the third quarter of 2014. We are working hard to make each of our portable storage operating geographies increasingly successful. We are on track towards building a meaningful sized storage container rental business with attractive operating metrics. Now for a few closing comments, there are very compelling factors supporting our share buyback activity thus far in 2015. Over the past two years, we've been through a significant investment cycle in the company. During this period, we launched our portable storage business, expanded our modular business to the mid-Atlantic region from Georgia to Washington DC, entered the liquid and solid containment rental industry through the acquisition of Adler Tank Rentals and created a national footprint for the business. We have also shepherded the turnaround and continuing recovery of our modular business through improving financial health from having lost approximately $1 of annual EPS due to the effects of the great recession. Historically, our modular division has been our largest earnings engine. We are well on our way to creating four large rental businesses whose combined annual earnings horsepower will be materially greater than we have experienced to-date. As both the business manager and an investor of McGrath RentCorp, I can fully appreciate the challenges associated with getting four different rental businesses outperforming at favorable levels consistently. Difficult challenges with our different rental businesses will occur from time to time just as we're experiencing today with our electronics and liquid and solid containment divisions. However, that shouldn't overshadow the significant potential future financial performance of these rental businesses over time. The company's management and board are confident in the foundation for growth in place today supporting greater shareholder value in the future. Our buyback efforts in 2015 are a clear signal. We believe the longer-term intrinsic value of McGrath RentCorp has not been reflected in our share price more recently. And now Keith and I welcome your questions.

[Operator Instructions] And we will go first to David Gold with Sidoti. Please go ahead.

Hey, good afternoon.

Hi, David.

Just a couple of questions for you. First, can you speak a little bit about on the Mobile Modular side, what particular pockets or areas are we seeing the strongest demand there and trends in on non-res construction?

Well, if we go by market, you can look at -- and let’s just take it by market, I think if you look at the Texas market, we continue to have a strong year and that’s primarily from commercial and also from some educational greater demand. That’s been a healthy market for some time. It continues to be so for the time being. We have not seen any really negative impact from the oil and gas challenges thus far. If you look at the Florida market, we’ve had very healthy year-over-year quarterly rental revenue increases from the educational demand side. So we had a very good -- we had a good booking year last year, we had a better one this year and that’s primarily educational related. If you look at the mid-Atlantic region, we’ve had healthy year-over-year quarterly rental revenue increases from both -- primarily from educational and also from commercial demand. California, healthy year-over-year rental revenue growth from commercial and some educational demand, most of the business has come from the northern part of the state. Southern California is much more dependent upon educational market recovery, which is slowly occurring. We’re seeing some good uptick there. So that's really how I would characterize the modular business here this quarter and actually for this year as a whole.

And David if I could just add, if you look Q3 over Q3 in terms of the overall growth in the modular business, it was roughly half from education, half from commercial, so good balance and reflecting well the fleet investments that we’ve made. And as you’ll recall in prior quarters we had talked about commercial leading the recovery, now we’re seeing more balanced and then regionally all four major regions contributed strongly to the year-over-year growth in the business.

Perfect. And when you talk about seeing a good uptick in California on the education side, Dennis, how are folks essentially financing that, do you found another way, or any color you could add there is helpful?

Well, I would be happy to. Well, first of all, the way school districts in the past few years have been funding school facility projects is primarily through their local funds and these are two local bond funds, parcel taxes, developer fees, those types of items. And what has happened in California is because the demand has been so pent-up on both modernization of schools and for new facility that districts have gone ahead and really financed these projects themselves, whereas historically it’s been really 50% from the local level, 50% from the state level. And the really good news in all of this is that we received toward in the third quarter that a statewide facility bond is now qualified for the November 2016 ballot to be voted on by the electorate. The initial amounts for the bond issuer are approximately $9 billion. Keep in mind the last statewide facility bond measure to be on ballot in California was in November of 2016 and it was for about $7 billion. Also keep in mind that since 1982 only one statewide facilities bond measure has failed and that was in 1994. 14 out of 15 passed over this timeframe which is about 90% passed. It’s always based on 50% plus one vote, it’s not a high threshold. If passed, it will be extremely beneficial to the California educational facility market and we should benefit very handsomely both in terms of modernization projects which we put rental equipment into those market opportunity, as well as our Enviroplex on school facility purchases for more permanent installation.

And just to clarify that, so if it gets passed the electorate, is that the precursor to putting it on the ballot?

It’s already called the big item over the last 10 years has not been able to get one on the ballot. This is on the ballot. This was an initiative so it’s going to be on the ballot that’s guaranteed.

The size of it is currently projected at 9 billion. There could be some negotiating with the executive branch and that could be modified. I wouldn’t think it would be modified significantly. So it’s on the ballot in the statistics I gave you on 14 out of the last 15 facility bond measures happening, that’s once they are on the ballot. Voters have always been very, very supportive on a statewide basis and California has likely never been in greater need than it is currently for facility funding.

Okay. Perfect. And then on the repurchase, two questions, can you give us an actual share count as we stand today so we know what to use for the fourth quarter?

Sure. You will see it on the face of the 10-Q that was posted today and it’s basically 23.9 million shares. Keep in mind as well on the fully diluted share count you need to allow maybe a 100,000, 200,000 in addition to that posted number to get to a fully diluted number.

Okay. Perfect. So around 24 million should be a decent number for the fourth quarter?

In that neighborhood would be reasonable estimate. And again, it’s subject to whether we do anymore repurchase activity and other factors.

Okay. That brings to the second part of that question. With good room left on the authorization and we’ve been pretty aggressive so far, how are we thinking about repurchases on a go forward?

Yeah. I mean, a couple of comments. Clearly, we've been very active in recent months. And we’ve actually repurchased approximately 9% of the fully diluted second quarter share account. We tend to be opportunistic with our repurchase activities and try to take advantage of attractive market window opportunities. To the extent we make any more repurchases there are lot of factors that we take into consideration, obviously equity market factors where our share prices, trading volumes that allow us to be active in a big way. We monitor debt and covenant levels and obviously look at other capital deployment opportunities. So there's a lot of factors there. There’s no guarantee that just because we have the authorization that we will act on it, but clearly we felt there were some attractive price points over the last several months and we’ve tried to take advantage of that.

Perfect. Thank you both.

Thank you.

And we’ll go next to Scott Schneeberger with Oppenheimer. Please go ahead.

Thanks. Can you hear me?

Yes.

Great. Good afternoon. A follow-up on David’s questions on the repurchases. I’m calculating leverage at two times up to 2.3 now from second quarter and third quarter, is that accurate? And what type of comfort level do you have with regard to that? And I know you have the liquidity to borrow and do this, but is your comfort to borrow and to do it versus just drawing from free cash flow to perpetuate the buyback plan? Thanks.

Yeah. First Scott, you’ll see if you look carefully the press release, we actually give you the leverage at the end of the third quarter, it was 2.26, so your calculation was right in line with that. And again, I just back over to comments from a moment ago, we tend to be opportunistic. We look for opportunities in the market to be aggressive. We obviously felt we encountered that opportunity over the last few months. In terms of leverage on our debt agreements, we can go as high as 2.75. So the factors will be looking at in the months and quarters ahead will be continued performance of the business and growth over time in EBITDA, which allows us to borrow more for the business as a whole and then looking at other opportunities to deploy capital. But we definitely feel that in recent months buying back our own shares has been a good investment.

Thanks, Keith. The fourth quarter specifically now. You guys are trending toward the high end of the EPS range for the full year guidance. Any puts and takes that at least you keep in mind as we model for this upcoming quarter, any one times or other things like that? Thanks.

Sure. I’ll just flag a few items. First of all, if you look at our comments in the middle of the year when we reset guidance, we felt that we would've lower sales this year than last year that still holds true. If you look at Enviroplex, our modular business and even our electronics business, we’re seeing lower levels of sales activity compared to a year ago. Sales can be lumpy for us. They’re not the primary business. The primary business is rental. And so I would say as we look into the fourth quarter, I would add that comment again it’s been a factor. I think sales outlook will continue to be on the softer side for the fourth quarter. The other thing I would say is with our TRS business and our Adler business, we always warned folks that the fourth quarter is a period where we encounter seasonality. And particularly as we get around thanksgiving through the end of the year, its quite common to see some drop off in rental activity in both those businesses. So it's very hard for us to forecast internally. But we would expect that that would be likely to occur in one or both of those businesses in the fourth quarter of this year. And then the other comment I would make is given the strength that we've seen in the modular business and already some potential demand for new orders in the early part of next year, we may continue to invest in fleet in the fourth quarter and that is a wise investment if its demand driven and is to support orders for early in the new year. So those are just some of the factors that come into play. I think taken as a whole, we would expect earnings to be lower in the fourth quarter than in the third quarter. And you can sort of form your own assessment where that might lie.

Thanks. Just on your comment on purchasing new fleet, what categories are you looking at? What’s relevant to that discussion? Thanks.

Well, the comment -- just to be clear, it’s an expense in existing fleet. So getting units ready to go out on rent and that’s captured under that direct cost of rental operations other. And again, the area where we be making investment -- significant investments in the modular business and we may well do more of that in the fourth quarter.

I might add that this is the time of the year, we’re foreseeing demand in the educational market, a greater significance that we want to start ramping the pre-prep of existing classroom building, which is kind of the last most significant passion of underutilization in California. So that’s -- if we’re seeing more activity there, we want to take full advantage of that in getting equipment ready to meet demand.

Thanks. And on the -- I get it on the OpEx versus CapEx. On CapEx at this point of ‘15, how you’re thinking about ‘15 ending and starting in the ‘16 with regard to CapEx and categories there? Thanks.

Sure. Just a couple of comments, year-to-date $105 million spent on new rental equipment, that’s done from a $113 million over the first nine months of last year. We’ll be relatively light on CapEx in the fourth quarter as a full year may come in somewhere in the $125 million to $130 million neighborhoods. So if you look at it on a year-over-year basis, we will probably be spending less on modular, as we continue to utilize more of our existing fleet that was off rent. Our electronics business is probably going to be comparable to last year. And then Adler is running at less than half what we spent last year, really very little need to add equipment there. So that gives you sort of sense of where things are at. Looking into next year, it’s too early to tell. I think if you look at a very high level, we have a lot of fleet investment already made in the Adler business. With our electronics business, we’d like to see some improvement in utilization but we’re going through a transition with that business, a little less emphasis on the wireless and telco side and some growth on the general purpose side, so there is a shifting going on. And then with the modular business, there are opportunities to deploy new capital in several regions as well as in our portable storage business. We’ll be looking hard to those and we’ll likely be funding carefully additional growth in key markets.

And then, that said, we’ve got a lot to work with. I want to emphasize what Keith said, we got a lot to work with that we already own and we can -- we plan to make -- take full advantage of those opportunities.

Okay. Thanks. And just my final question and follow-on to of all that. I know you’re not going to provide 2015 guidance at this juncture? But each of the segments, what is the early outlook just on how you see trends next year if things remains a stable as they are right now, the demand trend stable as they are? What kind of meaning that would have moving into next year for each of the three major segments? Thanks.

Well, Scott, at a very high level, the modular business is turning the corner. It’s doing extremely well. Assuming the bond measure passes next year which we have very high confidence that will. The momentum for school which already had started last year got stronger this year. We’re hoping to be strong entering next year that all bodes very well for that business going forward. And plus we’re going to be getting the year-over-year revenue -- rental revenue impact from what gets put on in the second half of 2015 that we start seeing a full year's worth of rental in the next year. If you look at our liquid and solid containment rental business, the oil and gas industry right now is going through some significant changes. And with that business, we expect to have some material headwind for it, until that industry really settles out in terms of consolidation of the company's, there’s going to be some bankruptcies or sale of assets. There's been much less capital investment, et cetera. So that’s quite a bit of an unknown to us, but we’re taking a very cautious look and we’re really trying to manage our cost tightly. And at the same time, we have a lot we can do in terms of building a real world-class sales force and really expanding our number of opportunities in other verticals outside of oil and gas. If you look at our test equipment business, quite frankly, even though we had a significant drop off this year that's really been primarily related almost exclusively to the wireless communication side of things and in a particular type of testing that have been done in that industry over last three years to support really 4G 100-megabit transmission environment. So that business, even though that vertical has really been very challenged and we don't really expect to see a great deal from that over the next year or couple of years. It’s performing well on the other vertical. The general purpose -- year-over-year rental revenues, general purpose for 2015 were higher than 2014, we are doing well in the non-wireless areas in communications test equipment. So electronics despite the significant drop-off this year, if it maintain somewhere in the same area, we think that’s going to be fairly good for next year. We’ll have to see how that plays out. And then there will be another cycle with not just the 4G fourth-generations but when the fifth-generation of wireless networks takes off, more so in R&D and then the deployment installation of maintenance, they will participate more in that, but the businesses well run and we’ll have to see how next year plays out.

Okay. Great. Thanks for all the color.

Okay.

[Operator Instructions] And it appears we have no questions at this time. I’d like to hand the call back over to management for any closing remarks.

I’d like to thank everybody for joining us on our third quarter call today. We’ll look forward to sharing our fourth quarter results, as well as 2016 full-year guidance at our call towards the end of February 2016. Thank you so much.

This does conclude today’s conference. You may now disconnect and have a wonderful day.