Construction Partners, Inc. (ROAD) Q1 2020 Earnings Report, Transcript and Summary

Greetings, and welcome to the Construction Partners’ First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, Investor Relations for Construction Partners. Thank you, sir. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners’ conference call to review first quarter fiscal 2020 results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net. Information recorded on this call speaks only as of today, February 7, 2020. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay. I also would like to remind you that the statements made in today’s discussion that are not historical facts, including statements of expectations or future events or future financial performance, are considered forward-looking statements made pursuant to the Safe Harbor’s provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today’s call that by their nature are uncertain and outside of the company’s control. Actual results may differ materially. Please refer to the earnings press release that was issued this morning for our full disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company’s filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA. Reconciliations to the nearest GAAP measures can be found at the end of our earnings press release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements. And now I would like to turn the call over to Construction Partners’ President and CEO, Mr. Charles Owens. Charles?

Thank you, Rick, and good morning, everyone. With me on the call today are Ned Fleming, our Executive Chairman; and Alan Palmer, our Chief Financial Officer. I will start today by providing an update on our first quarter, and I will then turn the call over to Ned for a few additional comments. Finally, Alan will review our financial results before we take your questions. We are pleased with our performance in the first quarter that produced double-digit year-over-year growth in revenue, gross profit and adjusted EBITDA. This growth was driven both by improved performance in our existing markets and by recent strategic acquisitions in Florida and Alabama. The first half of our fiscal year, historically, reduces approximately 40% of our annual revenue based on the seasonality of our business, and these first quarter results are in line with our expectations. We continue to see sustained demand across our 33 distinct markets for road repair and maintenance work. We also see sustained competition, and this business we are competing every day for work. Our team is focused on reducing cost and maximizing efficiencies throughout our organization and construction project work to achieve profitable growth. It is important to point out that the flexibility of our model provides opportunities to pursue projects that will allow us to enhance the utilization of our workforce and equipment. We continue to pursue projects, both public and private that all possess the best opportunity to grow profitability. I know the key aspect of our business is our geographic diversity. Operating across 33 separate markets in multiple states, we have exposure to different local economic environments on the private side. And on the public side side, we have five different state DOTs and a large number of other public entities that we can work with throughout these markets. This diversity allows us to bid on both public and private projects to maximize our vertically integrated business model. Turning to our recent acquisitions. We have fully integrated the acquisition we made in October, which is a hot mix asphalt plant and a paving company in high-growth area of the Florida east coast. We have now successfully completed five acquisitions since our IPO in May 2018 and a total of 20 acquisitions since founding the business in 2001. We are pleased with the performance of the operations we acquired in Florida and Alabama. We continue to see growth opportunities in those markets. In Florida, in particular, where we now have a broader footprint in the eastern side of the state. We expect these markets to benefit from the close proximity and enhanced vertical integration with our diverse equipment fleet and workforce capable of performing a broad range of services. We believe there are meaningful opportunities to add scale, drive growth and provide value for our customers. As we progress through fiscal 2020, we will continue to consistently execute the strategy of controlled profitable growth, utilizing three primary levers. By doing more work in our core market, by making strategic acquisitions and by expanding through greenfield opportunities. We continue to have active conversations with potential acquisition candidates. We also remain patient with acquisition opportunities and evaluate prospects that best fit our strategy. Before turning the call over to Ned, I would like to thank our senior management team for their leadership, and I would also like to thank our more than 2,200 employees for their dedication and hard work that enable us to execute our strategy. Now I’ll turn the call over to Ned Fleming, our Executive Chairman, for a few additional comments. Ned?

Thank you, Charles. And good morning to everyone. The team delivered an excellent first quarter. As Charles and Alan have expressed many times, this is a seasonal business that ramps up throughout the year and expands from both a top line and a profitability standpoint during the second half of the year. So as we evaluate our first quarter results and look at the opportunities to come throughout the year with a combination of projected company growth and a number of potential acquisition candidates in markets of interest to us, we are truly excited about our future. Quite simply, the positive supply and demand dynamics of our business have remained pretty much the same since we started CPI in 2001. Roads are deteriorating, and local, state and federal government funds are being used to repair them. In fact, I might argue that those dynamics are even better today because the deteriorating road conditions across the country have not improved. And in most places have worsened. And more and more states are taking ownership by implementing GAAP taxes to help maintain and improve roadways in their states, which is exactly what has happened in all the states we operate in. As Charles mentioned, we have a flexible model, enabling the team to work on private or public projects across the 33 unique mini economies in which we compete. Some of our markets are experiencing good economic growth right now. Others have less growth and others might be down or slightly flat. However, our broad geographic diversity brings stability and consistency to the company. Also we have the flexibility to move equipment and crews and the ability to do different size in all type projects, which further differentiates us from many of our competitors. Over the last 20 years, our business model has shown resilience and consistency in different economic and competitive environments. The team is committed to continually improving business processes to grow revenues and margins. The opportunities today to utilize technology, integrate more efficient processes benefit from a more flexible organization to drive efficiency are terrific. As the entire CPI teams continue to execute at a high level, led by seasoned and experienced operators across the organization, we plan to continue to deliver strong results, consistent with our strategy for achieving controlled profitable growth. Throughout the year, we plan to continue to tell our story to investors, which we believe provides a very compelling investment thesis. The team continues to work hard to enhance financial results, cash generation and maximize value for our shareholders as well as all the stakeholders. And with that, I’d like to turn the call over to our CFO, Alan Palmer. Alan?

Thank you, Ned. And good morning everyone. I want to start by quickly highlighting our key performance metrics in the first quarter. From a financial standpoint, as Charles mentioned, year-over-year growth in the first quarter was driven by improved performance in our existing markets and by recent strategic acquisitions in Florida and Alabama. Revenue for the quarter increased to $175.3 million, up $21 million over the same quarter last year. Organic revenue growth was approximately $7.9 million and acquisitive revenue growth was approximately $13.1 million, attributable to acquisitions completed subsequent to the quarter ended December 31, 2018. Gross profit increased to $23.8 million, up approximately $2.6 million over the same period last year, primarily due to higher revenue and a higher margin. Net income was $5.5 million, up from $5.2 million compared to the same quarter last year. Earnings per share were $0.11 compared to $0.10 per share last year. Note that interest expense declined approximately $235,000 compared to the same quarter last year due to a decrease in the average interest rate as a result of amending our credit agreement in June 2019. Our effective tax rate was 19.5% compared to 24.3% for the same period last year. The lower effective tax rate was due to a discrete tax reduction of $363,000 in the quarter related to an amended state income tax return. We expect our effective tax rate for the remainder of the fiscal year to be approximately 25.2%. Adjusted EBITDA increased approximately $2.5 million to $17.2 million resulting in an adjusted EBITDA margin of 9.8%, compared to 9.5% in the first quarter last year. The higher adjusted EBITDA was a combination of higher gross profit and depreciation, depletion and amortization, partially offset by an increase in general and administrative expenses. General and administrative expenses were $17.1 million in the first quarter of 2020 compared to last year of $14.4 million. The $2.7 million increase was primarily the result of a $1.4 million increase in management personnel, payroll and benefits, a $797,000 increase attributable to acquisitions completed subsequent to December 31, 2018, and a $395,000 increase in stock compensation expense. Turning now to the balance sheet. At December 31, 2019 we had $49.4 million of cash and $13.6 million of availability under our $30 million revolving credit facility after deducting outstanding letters of credit. Our debt to trailing 12 months’ EBITDA ratio was less than one time at [indiscernible]. We have a very strong balance sheet to support our growth opportunities. Cash provided by operating activities was $1.5 million from three months ended December 31, 2019, compared to $1.2 million for three months ended into December 31, 2018. CapEx in the first quarter of fiscal 2020 was $23.6 million, excluding approximately $11.5 million to purchase certain equipment that was previously subject to operating laces, our CapEx was $12.1 million in the first quarter compared to $7.4 million in the same quarter last year. For fiscal 2020, we expect our capital expenditures to be in the range of $44 million to $47 million, excluding the $11.5 million purchase of equipment that was previously subject to operating leases. Project backlog at December 31, 2019 was $539.1 million compared to $531.6 million at September 30, 2019 and $572 million at December 31, 2018. Of our current $539 million in backlog, approximately 75% or $403 million is expected to be completed during the reminder of our fiscal year. We maintain a construction backlog composed primarily of recurring maintenance-related projects of the type that we prefer, and we continue to see opportunities to bid on these projects in our markets. Keep in mind that we focus on our backlog in 33 distinct markets, meaning we want to have six to nine months of backlog in our markets. As these market-specific backlogs are aggregated for our company-wide backlog, while the overall amount can fluctuate quarter-over-quarter based on several large projects either being added or completed, we focus on the overall health of backlog in terms of the next 12 months in each specific market. We also maintained a disciplined approach to strategically focus on recurring repair and maintenance projects. Historically, our backlog builds during our second and third quarters as more of these projects are typically let in February through May. We are maintaining our full year outlook for fiscal 2020 based on our historical experience of generating approximately 40% of our revenue in the first half of the fiscal year and approximately 60% during the second half. Our fiscal year 2020 outlook with regard to revenue, net income and adjusted EBITDA are as follows: revenue of $830 million to $870 million compared to $783.2 million in fiscal year 2019; net income of $39 million to $44 million compared to $43.1 million in fiscal year 2019; and adjusted EBITDA of $94 million to $102 million compared to $92.3 million in fiscal year 2019. In summary, we are pleased with our first quarter results, and we continue to see positive market trends and project demand in fiscal 2020. With that, we’ll now take questions. Operator?

[Operator Instructions] Our first question comes from the line of Michael Feniger with Bank of America Merrill Lynch. Please proceed. And we will move on to our next question, which comes from the line of Adam Thalhimer with Thompson, Davis. Please proceed with your question.

Good morning, guys. Nice quarter.

Good morning.

So can you give us a little more color on – you said you’d like to have six to nine months of backlog in your specific markets, can you give us a little more color on how you guys view the current level of backlog?

Considering the time of the year, we’re pleased with it. We do expect with the projects that we’ve got available coming up in the next few months and what we’ve already seen, as far as our bid results in January for that to build, like it typically would going into the second – the end of the second quarter. And then there will not be as much build in the third and fourth because we do so much of our revenue, but we see a lot of good opportunities out in front of us in many of our markets to be able to build that backlog some more.

Okay. And then curious on the seasonality of EBITDA. The last couple of years, EBITDA has declined from December to March, but were picked up in the back half. Is that – would you expect a similar trend this year?

Yes. As generally, our volume in our second quarter, which is January through March is the lowest volume of the year. So a lot of the fixed cost that we incur in January, especially in repairs of plants and equipment and the slowdown, they impact that margin. Our job margins are fairly consistent throughout the year. But the plants and equipment accounts are the ones where we have a lot of fixed costs that will incur in that quarter with a lot lower revenue. So that’s usually our lowest gross profit core.

Okay. Thank you.

Thank you.

Thank you. Our next question is from Michael Feniger with Bank of America Merrill Lynch. Please proceed with your question. Mr. Feniger, your line is live.

Can you hear me?

Yes. Good morning.

Good morning. Sorry about that. I think I might have – I apologize. I think – I’m sorry, if I made you guys repeat your question here. With – maybe we could just touch on the SG&A. I think it was pretty high as a percent of sales. I know there’s a seasonal impact with the lower revenue. And maybe you just touched on this with the question prior. But is there anything we should be aware of with cost from new acquisitions or something that was running a little bit higher in the first quarter. And how that might trend through the rest of the year?

Yes. In the first quarter, we had about $800,000 of G&A that was related to acquisitions that we didn’t have in the same quarter of last year. So quarter-over-quarter, this year to last year, that was part of it. We also had some – about $400,000 of non-cash equity-related to – the directors last year chose to take their directors compensation in stock instead of cash. And so that was a non-cash that we did not have in the same quarter last year. Then the other was just primarily increase in staff that we’ve added in the administrative level. We also have some expenses in our first quarter that occur in that quarter for safety awards and other type of employee cost that generally are – they’re paid prior to in December prior to the end of our first quarter. So that kind of bumped up that first quarter. That amount should trend down in the second, third and fourth quarter, absent any additional acquisitions. So the run rate in for overhead in this first quarter should be the highest for the year.

Okay. That’s very helpful. And then I’m just curious like the FAST Act authorization, I think, expires in September this year. Look, I think you guys have been in this industry a long time, you’ve seen this before. I’m just curious if you could flag to us how we should see the market evolving, how DOT budgets kind of evolve as we approach September, if any changes at all?

This is Charles. We really don’t see any major impact at all. We just kind of almost become standard for these things to expire, and then they get funded through CRs until – so we really don’t anticipate any slowdown. We still got a lot of tailwind in our bag, whether a lot of the states, that’s gas taxes have kicked in, and they continue to kick in. And obviously, we don’t have anything in our model based on anything new. But we just think it’s going to be business as usual.

We are the state of the union address and then rebuttal by the democratic party. And I think their first comment was about infrastructure bill. So there’s certainly a consensus across all the political spectrum to get something done. And we’re hopeful that, that might get done before the FAST Act expires. But as Charles said, if it doesn’t, continuing resolutions are a normal part of it. And DOTs have gotten very accustomed to that in the last 10 years.

That makes sense. And if I could just squeeze one on the private side. I mean I know we’re talking a lot about the public side. Just are you guys observing anything in your districts on the private side that suggests alarm. There’s been some concerns on the non-res construction side and in some areas in some states. I’m just curious if you guys are observing any of that in your book of business?

On the private side, we’re still seeing a lot of commercial, and we’re still seeing a little bit of residential, that’s kind of been normal. But that’s a business that we don’t chase too hard. It is the ones related strictly to the residential development. So – because a little bit of their cyclicality. But in the markets that we’re still in, we’re still seeing a very strong economy. We’re still seeing a lot of work being let. And so far, the markets that we’re in, we’re very positive that, that is going to be a continuation for the next several months.

Fair enough.

Thank you. We’ll move on to our next question, which comes from Andrew Wittmann with Robert W. Baird. Please proceed.

Great. Thanks, good morning, guys. I guess my first question is probably here for Alan. And I just wanted to talk about the CapEx number. You guys called out last quarter very clearly that you’d have this kind of operating lease buyout. Alan, I was hoping you could give us – just give all the investors here a little bit of flavor of the type of things that were involved in those leases. And if you could, it would be very helpful for you to quantify the amount of lease expense or rent expense on those operating leases that was previously expensed that’s now going to turn into depreciation on a go-forward basis.

Okay. The amount that we bought out in October was $11.5 million as the fair market value of those leases. So – and from a depreciation standpoint, that would equate to approximately $2 million a year. I don’t have an exact lease expense amount, but it probably would be $2.5 million, I would say, but I can get that exact number because we did our analysis of whether to buy it out. But – so and that was, for us, that was figured into our 2020 budget because we knew we were going to do those because those leases were going to go on our books one way or the other as a capital asset. And then we also, if you – when you look at the balance sheet, you’ll see that we booked about another $8.5 million worth of the value of operating lease assets because we became subject to the new lease standards, October 1. But to the first part of the question, all of that would have been equipment related that we bought out. So those would have been operating leases for bulldozers, rollers, trucks, there were a good number of enough trucks that we had leased and then some other heavy equipment. So that’s the type of things that we had on operating leases. We still have some of that. But we have a number of locations that we lease property that our asphalt plants are sitting on, whether it be in a quarry or just outside of a quarry. And so that is the majority of what is in that operating right-of-use asset. So there’s some additional yellow iron but not a lot.

That’s helpful color. Thank you for that. And just kind of another aspect here of the cash flow here, is that calculated here, the DSOs are up decent number of days sequentially. And I was just wondering if you could kind of give some of the mechanics behind that. Certainly, the fact that you did an acquisition in the quarter, you don’t get all the revenue in that quarter from the acquisition, but you do book all the receivables. I have to imagine that’s part of it. But I don’t know, if you could help you could help just understand what’s going on here? Because last quarter, there was a lot of discussion about how there are some state DOTs that we’re paying you kind of slow and you thought that you’d catch up on that. And so I just thought it would be helpful for everyone to hear a little bit about the status of some of those receivables that you talked about last quarter and have it relate back here to the DSO calculation.

Yes. And we do expect to – for that to have the delays from the DOT to have less impact as we go through the year. Unfortunately, the first quarter, December specifically, there are a lot of holidays. And while our accounts payable people weren’t taking off, we kept paying our bills. A lot of the customers took advantage of the holidays and said they’d pay us in January. So from a past due standpoint, which is really what we look at, we are still in good shape there. We have very few write-offs of receivables and certainly not on the public side. But the delay in collecting some of them is still – it’s still real, but it should not increase. And we do feel like we can get back a little bit more on track in the second quarter because we won’t have the holidays, where they take off for the last week or two, which is when we often get paid from the DOTs.

Okay. That’s helpful. And then I guess, just my last question here has to do with the comments from the prepared remarks. You kind of mentioned that you see continued state growth, but there’s also sustained competition. Charles, I was wondering if you could just expand upon that a little bit. Are you seeing – is the competition pricing any differently or going about their business any differently? Are you referring to anything specifically that you saw here during the quarter or new entrants, things of that? I just thought maybe kind of expanding upon that commentary on the competition would be helpful.

From a competitive standpoint, obviously, this business is a very competitive business, and it’s always been, but as far as anything that we see, any different that we normally haven’t seen, we’re not seeing anything that – I guess, the point I brought up was that every job we get that is normally on a competitive basis, and that’s one reason that we have to work so hard to improve our efficiencies and really understand our markets. So we can maximize our profitability.

Okay. I’ll leave with that. Thank you very much.

Thank you. Our next question is from Trey Grooms with Stephens. Please proceed.

Hi. This is actually Noah Merkousko on for Trey. Good morning. So my first question, it looks like the adjusted EBITDA margin was up about 30 bps, but it came in a little bit lower than we were expecting. Is this in line with your expectations? And maybe was there anything in the quarter that pressured the margins more than you had originally thought?

It was very much in line with our expectations as far as what we expected. We – our jobs performed at a very good level in the quarter. We had enough volume going through the plants and the equipment that they were in line. Actually, the plants were slightly better and the equipment just slightly more cost than we had. So overall, those were in line. We were pleased with our external sales that contribute to that and the performance of the liquid asphalt terminal. So we were actually – at the gross profit line, we were a little bit higher than what we anticipated on that revenue. And then, I’ve talked a little bit about the G&A that was a little bit higher than what our expectation was. But again, part of that is due to those costs that come in, in that fourth quarter that when we’re budgeting, they’re more equal throughout the year. So – and then we had about almost $700,000, $800,000, I think it was of acquisition cost in the quarter. So – but overall, the overall margin was just maybe 10 basis points above what we expected.

Okay. That’s helpful. And then just to follow-up on that, your guide implies an EBITDA margin of 11.5%. How should we think about that ramping up? Last year, I think the back half saw that margin, 4% to 5% higher. Is that – would that be a good assumption to use for this year?

Yes, that that should be pretty much in line. The second quarter, historically, is going to be the lowest margin if we follow the typical. And then that third and fourth quarter is when it’s generally going to be 4%, 5% higher. And then you average out to that 11% because you’re going to do about 60% of your work in that quarter. So it’s not only going to be a higher margin that’s going to be on that higher revenue. So we still feel good about our full year guidance. And then, of course, when we finish our second quarter, we generally give an update on our annual guidance at that time, and we’ll have a real good – of course, at that time, we’ll know what that second quarter looks like.

All right. Thanks. That’s helpful. I will leave it there.

Thank you, Noah.

Thank you. Our next question comes from Josh Wilson with Raymond James. Please proceed.

Thanks. And good morning.

Good morning.

First, last quarter, you talked about the mix of projects letting, maybe being a little biased towards mega projects, I think you talked about how that’s evolved and what you see that looking like going forward? Is that normalizing as you had previously thought?

Yes. When we talked about it last quarter, we were – I think we were talking really more about as it related to the backlog and having not built that up some and as much in the third and fourth quarter. So a lot of that was happening in, I’d say, the January through August, September period last year, and we expected – we didn’t see a lot of mega projects out in the future so – and that’s still the case. We’re not seeing a lot of those large projects out there that eat up a lot of it. We are seeing a return more to the more repair and maintenance-type projects. And there’s still some time before that’s going to happen real strongly in North Carolina. That was one where they spent a lot on the mega projects in the early part of 2019 and kind of got a little bit behind with their budgets. So – but we’ve been able to stay busy in our markets by shifting a little bit more to cities and counties and private work. Those don’t generally give you a big backlog boost because those are generally smaller contracts and DOTs, but they keep you very busy. But the outlook we see in the next nine to 12 months as far as projects to bid, I don’t think we’ve seen a single mega project in the outlook of DOT projects that we’ve got coming up in any of our states, as I recall.

Got it. And then in the December quarter of last year, there were some pretty significant weather headwinds, anything to note here or is this pretty representative, you think, of what the, sort of, seasonality should look like.

Yes, this was a much closer return to normal, I think, the percentage of our annual revenue in the first quarter is usually somewhere between 20.5% and 21.5% of our annual revenue. In this quarter, it was 21% of the low end of our guidance. So very typical. We had a really good start with October and November, December due to the Christmas and New Year’s falling in the middle of the week, that was more of a disruption than usual. And then we had some unfavorable weather in the last half of December. So we lost a little momentum there. But overall, I’d say it was a bigger typical first quarter.

And then last one for me in terms of the gas tax benefits in Alabama, in the past, you’ve talked about those ramping up in the back half. Is that still your expectation?

Definitely. We’re seeing coming up in February, March, the cities and counties got projects that they’re letting, and that’s exactly what we expected.

Got it. Good luck with the next quarter.

Thank you.

Thank you. Our next question is from Bill Newby with D.A. Davidson. Please proceed with your question.

Good morning. Thank you for taking my questions.

Yes, Bill.

Charles, I just wanted to touch on Alabama quickly. I guess are you guys starting to see bidding activity pick up in that market at all, now that you have that transportation bill in place. I guess if you haven’t, do you have any line of sight into when that acceleration might begin?

Yes. Yes, we’re seeing the gas tax money being put in place now, and we’re seeing more projects is related to the gas tax increase. So we anticipate that to continue as we go further. As you know, when you first put something in place, you kind of go through a short period of time you need to collect it before you spend it. And that’s one thing about Alabama DOT, they do a pretty good job in making sure that they don’t get too far out, go disguise with the projects they let versus the money coming in.

I guess, and then just quickly on the asphalt mix cost on the asphalt mix cost, are you seeing anything in that market shifting since the beginning of the year? I guess I’m just wondering with IMO 2020 in place, are – there’s any dynamics there that are kind of moving around?

No, we haven’t seen anything that’s really made any kind of impact to us at all about it. As a matter of fact, I think these have fueled down back fairly low right now. And so we just don’t anticipate anything that’s going to – from that impact, it’s going to have any impact on our business.

Bill, the asphalt cement prices normally during the winter, those will drop, and that’s what we’ve seen this year. That’s one reason we have the term and we’ll try to do a winter field, where we store extra material when the price is lower. So really, any change in the asphalt cement has been more typical of what happens in the winter anyway as opposed to any kind of big reaction to IMO 2020. And as Charles mentioned, and I think we may have talked about on the call before. The prior time, if there was any area we were going to expect much impact or much price change, it was in the diesel fuel because of what the ships we’re going to have to burn. And in fact, we’ve seen diesel cost after probably mid-November have just kind of trended down and really had no spike. And of course, some of that is a lot more related to the price of oil and all that’s going on in China. But we really have not seen any impact that we would attribute IMO 2020 at this time.

Got it. That’s great. Thanks. Very helpful guys. I appreciate it.

Yes.

Thank you. Our next question is a follow-up from Michael Feniger with Bank of America Merrill Lynch. Please proceed with your question.

Hey guys. Just a quick follow-up, and apologies if you already addressed this. I’m just curious on your pipeline with the acquisitions, are you seeing an accelerating case of companies willing to discuss with you, maybe family businesses looking to try to get in front of the election or election risk there? Or is it kind of just the same kind of pace of discussions that have played out for you guys the last few quarters? Thanks.

All right. Thank you, Michael. This is Charles. We’re seeing about the same pace. Obviously, the driver to getting these things done is the sellers because this is – it’s big steps. And they want to make sure that they make good decisions and get to employees with good people. But as far as – I’d just say it’s kind of a normal pace right now. We do – having a lot of conversations with a pretty good group of people. And obviously, we feel very positive for this year for someone [indiscernible]. So that’s kind of where that stands.

Thanks guys.

Thank you. It appears there are no further questions at this time. So I’d like to pass the floor back over to management for any additional concluding comments.

Okay. I’d like to thank everyone for joining the call today and look forward to speaking with you all on the next conference call, and we will remain focused on our – executing our strategy, and I hope everyone has a good week.

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