Simpson Manufacturing Co., Inc. (SSD) Q4 2019 Earnings Report, Transcript and Summary

Greetings, and welcome to Simpson Manufacturing Company Inc. Fourth Quarter 2019 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] Please note this conference is being recorded.I would now like to turn the conference over to your host, Kim Orlando with Addo Investor Relations. Thank you. You may begin

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company’s fourth quarter and full year 2019 earnings conference call.On this call, the company may discuss forward-looking statements such as future plans and events. Forward-looking statements like any prediction of future events involve risks, uncertainties, and assumptions that could cause actual results to differ materially from these statements. Some of these factors and cautionary statements are discussed in the company’s public filings and reports which are available on the SEC’s or the company’s corporate website. Please note that the company’s earnings press release was issued today at approximately 04:15 PM Eastern Time. The earnings press release is available on the Investor Relations page of the company’s website at www.simpsonmfg.com. Today’s call is being webcast, and a replay will also be available on the Investor Relations page of the company’s website.Now, I would like to turn the conference over to Karen Colonias, Simpson’s President and Chief Executive Officer.

Thanks Kim, and good afternoon, everyone. I’m pleased to discuss our results with you today. I’d like to begin by reiterating our commitment to positioning Simpson for long-term sustainable and increasingly profitable growth. To that end, we made significant progress both operationally and financially throughout 2019.Our net sales improved 5.4% over 2018 to $1.14 billion, driven by higher sales volume, despite the adverse weather conditions experienced in the first half of the year and lapping the benefit of higher sales prices following the price increases we implemented in mid-2018.This combined with our focus on rationalizing our cost structure resulted in a 100 basis point improvement in our total operating expenses as a percent of net sales to 27.9% versus last year in line with our expected range. In addition our tax rate decreased to 24.9% from 26.4% last year. As a result, we generated strong earnings of $2.98 per diluted share up 9.6% over 2018.Importantly, we continue to make progress towards the aggressive targets we unveiled as part of our 2020 plan in order to maximize operating efficiencies and drive long term stockholder value. Accordingly, by the end of the year, we expect to do the following; achieve an organic net sales compounded annual growth rate of 8%, reduce our total operating expenses as a percent of net sales to a range of 26% to 27% resulting in an operating income margin of approximately 16% to 17%, improve our return on invested capital to a range of 15% to 16%, improve our concrete business gross margin to approximate 42%, and finally improve our European operating income margin to be within the range of 8% to 9% excluding SAP, severance and goodwill impairment.As a testament to our confidence and execution against the 2020 plan, we were pleased to have returned $101.1 million to our stockholders in 2019 through share repurchases and dividends.I'd now like to spend a few minutes discussing highlights from our fourth quarter financial results as well as an update on our operational initiatives. Fourth quarter net sales increased 8.5% year over year to $262.5 million, primarily due to both higher sales volume and average unit prices. Compared to third quarter of 2019, our net sales were down primarily due to reduced shipping volume related to the typical Q4 seasonality we experienced as a result of fewer shipping days from holiday-related closures and a slowdown in construction activity due to the winter months.Partially offsetting the seasonal impact was the volume that shifted into the fourth quarter following the resolution of the labor strike we experienced through most of September at our Stockton facility. US housing starts grew 20% in the fourth quarter versus the comparable period last year, notably in the west and south where we provide a meaningful amount of content into homes, starts grew 27% and 16%, respectively, year over year.As a reminder, US housing starts are a leading indicator for approximately 60% of our business. That said, our results of operations do not typically reflect the impact from trends in housing starts until at least three to four months later.Looking ahead into the first quarter, it is also important to remember that our volume will be impacted by the typical Q1 seasonality we experience as a result of slowdown in construction activity during the winter months.Although US housing starts experienced double-digit growth in Q4 over a lighter fourth quarter last year for 2020, we continue to expect low-single-digit growth in US housing starts.Our fourth quarter gross margin of 41.9% remained under pressure. As such, our 2019 full year gross margin of 43.3% was slightly lower than anticipated. Aside from the factors impacting gross margin in 2019 included increased material, labor, factory and overhead costs and to a lesser extent, sales mix, we continue to hold one of the highest margin profiles in the industry.We do this by continuing to effectively manage elements within our control including maintaining a best-in-class customer experience, high quality trusted products and deep industry relationships. As Brian will discuss more in a moment, we expect our gross margin will range between 43.5% to 44.5% for the full year of 2020.I'd now like to update on our key operating initiatives which focused on growing our market share, rationalizing our cost structure in an effort to improve our profitability without sacrificing our competitive edge, and improving our technology and systems to continue providing exceptional service to our customers.In Europe, our 2019 net sales of $155.1 million decreased 2.4% year-over-year, primarily as a result of the negative $9.2 million impact from foreign currency translations. In local currency, Europe's net sales increased 3.5% over 2018, primarily through a combination of volume improvements and higher selling prices.Throughout the course of 2019, we also made substantial progress on our lean initiatives and three-phase SKU reduction program to rightsize our product offering. To date, since year-end of 2016, we have removed over 7,000 SKUs.As of December 31, 2019, our inventory balance was $251.9 million, down $24.2 million or 8.8% compared to levels at December 31, 2018. When looking at the decrease in pounds on hand, we've reduced our product inventory in North America which is the bulk of our total inventory by almost 5% in terms of pounds on hand, including finished goods which have come down by approximately 8%.Comparing to December 31, 2016, we've made good progress as aggregate inventory pounds on hand in North America have decreased by nearly 8% including finished goods which has come down over 17%, while dollars have increased approximately 5%.Inventory returns for our company have improved to almost 2.5, as we continue to focus on improving our inventory balance through careful inventory management and purchasing practices. As it relates to improvements to our technologies and systems, our SAP rollout has continued on plan. Our remaining North America branches are scheduled to be on-boarded by the end of the first half of 2020, at which time approximately 85% of our revenue will have been transitioned.We have been enjoying various positive benefits of the SAP implementation, including stronger forecasting tools and overall enhanced production efficiencies. We are working towards a company-wide completion around the end of 2021.In summary, 2019 was a year of solid operational execution helping us to achieve organic growth, enhancing operating efficiencies and improved profitability. Through our efforts we are excited to be delivering even more values to our stockholders.Before I wrap up, I'd like to thank all of our employees for their passion and commitment to our customer service and safety. At Simpson we value the safety of all employees and continually work to minimize employee exposure to any potential risks.I'd now like to turn the call over to Brian to discuss our fourth quarter financial results as well as our 2020 outlook in detail.

Thank you, Karen, and good afternoon, everyone. I'm pleased to discuss our fourth quarter financial results with you today. Before I begin I'd like to mention that unless otherwise stated all financial measures discussed in my prepared remarks today will be referring to the fourth quarter of 2019 and all comparisons will be year-over-year comparisons versus the fourth quarter of 2018.Now, turning to our results. Total net sales were strong increasing 8.5% to $262.5 million. Within the North America segment net sales were up 11% to $226.8 million due to both increased sales volume and higher average product prices.In Europe net sales decreased 4% to $33.5 million mainly due to the impact of negative foreign currency translations resulting from Europe currencies weakening against the United States dollar. In local currency Europe net sales were down only slightly for the quarter Wood construction products represented 83% of total net sales compared to 84%. And concrete construction products represented 17% of total net sales compared to 16%.Gross profit increased by 12% to $110.1 million resulting in a gross margin of 41.9%. Our gross margin increased by 130 basis points primarily due to lower factory and overhead costs on increased production, along with a slight decrease in raw material costs.On a segment basis, our gross margin in North America improved to 43.9% compared to 42.2%. While in Europe our gross margin declined to 29.9% versus 31.7%. From a product perspective, our gross margin on wood products slightly decreased to 40.8% compared to 41.1%.However, our concrete products gross margin increased substantially to 44.0% compared to 31.7% due primarily to the impact of a price increase we implemented in August on certain of our products in the US. To a lesser extent, concrete gross margin benefited from lower material costs as well as lower factory and tooling and labor costs.Now turning to our fourth quarter costs and operating expenses. Research and development and engineering expenses increased 15% to $11.8 million, primarily due to increased personnel costs due partially to the shift of employees from general and administrative expenses into R&D. Selling expenses increased 7% to $28.1 million increased 7% to $28.1 million, primarily due to higher personnel, advertising and promotional costs.On a segment basis selling expenses in North America were up 6% and in Europe they increased 11% due primarily to advertising and promotions. General and administrative expenses decreased 13% to $39.3 million primarily due to reduced legal and professional fees, including the settlement of a pending legal matter in 2018, as well as a reduction in amortization expense. These decreases were partially offset by higher personnel expenses and bad debt reserves.On a segment level, general and administrative expenses in North America decreased 13%. In Europe G&A decreased by 10%. As Karen highlighted we're pleased with the progress we've been seeing as a result of our continued focus on cost control. Total operating expenses were $79.2 million, the decrease of $2.3 million or approximately 2.8%. As a percentage of net sales, total operating expenses were 30.2%, an improvement of 350 basis points compared to 33.7% last year.Included in our fourth quarter operating expenses were SAP implementation and support costs of $33.8 million compared to $2.1 million in the prior year quarter. Since the project's inception we've capitalized $19.3 million in total and expense $25.8 million of the costs associated with the SAP project as of December 31, 2019.As we've progressed further into the SAP implementation, we are now expensing more of our costs versus primarily capitalizing them. Income from operations increased 94% to $36.6 million compared to $18.8 million. Income from operations for the fourth quarter of 2019 included a $5.6 million gain on the sale of a selling and distribution facility.In the fourth quarter of 2018, income from operations included an $8.8 million gain on a sale of a facility as well as a goodwill impairment charge of $6.7 million related to the Europe segment.In North America, income from operations increased 138% to $36.8 million due to the higher net sales, lower operating expenses and the sale of the aforementioned facility. In Europe, loss from operations was $2.8 million. In the fourth quarter of 2018, Europe loss from operations was $8.7 million which included a $6.7 million goodwill impairment charge.On a consolidated basis, our operating income margin increased by approximately 610 basis points to 13.9%. The effective tax rate decreased to 22.3% from 29.3%. And as a result, net income totaled $28.1 million or $0.53 per fully diluted share compared to $12.8 million or $0.28 per fully diluted share.Now turning to our balance sheet and cash flow. At December 30, 2019, cash and cash equivalents were $230.2 million, an increase of $70 million compared to our levels at December 31, 2018. We remain debt-free with only a small amount of capital leases. As a result of our improved profitability and effective working capital management, we generated cash flow from operations of $56.4 million for the fourth quarter of 2019, an increase of 8%.For the full year of 2019, we generated $205.7 million in cash flow from operations which increased nearly $45.6 million or 28% compared to 2018. Our fourth quarter capital expenditures were approximately $8.2 million, which included a minimal amount from our ongoing SAP implementation project.For the full year of 2019, capital expenditures were approximately $32.7 million, in line with our expectations. As we have stated since mid-2016, we have been committed to returning a minimum of 50% of our cash flow from operations on an annual basis to our stockholders in the form of share repurchases and dividends. Since then, we have returned over 75% of our cash flow from operations to stockholders, far exceeding that threshold.In 2019 specifically, we were pleased to have paid $40.2 million in dividends, including $10.2 million in the fourth quarter. In addition, we repurchased 972,337 shares of our common stock in 2019 at an average price of $62.55 per share for a total of $60.8 million. This includes approximately 118,000 shares that we repurchased during the fourth quarter of 2019 at an average price of $79.49 per share for a total of $9.4 million.As our authorization for repurchases of common stock expired at year end, on December 9, our board of directors authorized the repurchase of up to $100 million of our common stock which went into effect on January 1, 2020, and runs through December 31, 2020.In addition, I’m also pleased to announce that on January 21, 2020, our board of directors declared a quarterly cash dividend of $0.23 per share. The dividend will be payable on April 23, 2020, to stockholders of record as of April 2, 2020.Finally I'd like to discuss our 2020 financial outlook. For the full year ending December 31, 2020, we are initiating a guidance as follows; We expect our consolidated gross profit margin to be in the range of 43.5% to 44.5%, given our current expectations regarding material costs in housing starts; the effective tax rate to be in the range of 25% to 26%, including both federal and state income taxes; depreciation and amortization expenses to be in the range of $39 million to $41 million of which $33 million to $35 million is for depreciation of fixed assets; and capital expenditures to be in the range of $40 million to $43 million, including approximately 35%, which will be used for maintenance CapEx.In summary, we made significant progress in 2019 through execution on our strategic, operational and financial objectives to position Simpson for long term sustainable growth. We strongly believe in the value proposition of our company and believe our efforts through our 2020 plan towards even more efficient operations will help deliver enhanced value for the benefit of all our key stakeholders.Thank you for your time and attention today. Now, I'd like to turn the call back to Karen for closing remarks.

Thanks, Brian. Before we turn it over to Q&A, I'd like to extend my thanks to Ricardo Arevalo for his 20 years of service to Simpson including his most recent role as Chief Operating Officer, as he will be retiring in mid-February. We are in the midst of a formal search for Ricardo’s permanent successor as COO. We thank Ricardo for all his many contributions to Simpson over the years and wish him the very best in his retirement.Operator, you may now open the floor for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Karen and Brian, good afternoon. Thanks for taking the question.

Hi, Dan.

I want to focus first on gross margin and the outlook. You know finish the year up gross margins and in the low 43.3% somewhere in that ballpark. A little below expectations as you described, the guidance is essentially flat to up 100 bps roughly. And I'm just wondering why you wouldn't expect to see a little bit more recovery. Are you expecting incremental steel price pressures? Any changes in mix or just kind of simply being conservative as we start the year?

There's a couple of pieces, Dan. Certainly as we talked about we’ll start getting to Certainly, as we've talked about, we'll start get into a little bit better, still and we have seen in the last part of the year, steel prices go down and now we're seeing steel prices go up again.So, really, we're just basing on what we've got from a steel inventory standpoint and what we're looking at from those low-single-digit housing starts. Those are really the main elements that are impacting that gross margin. Certainly, we're very comfortable with labor factory tooling. But those two elements are really the ones that are driving this.

Got it. And then, as it relates to those housing starts and the outlook for 2020 of low-single-digit, you alluded to earlier to kind of easy comp you had a tough weather in the first half of 2019 creating – and that should set you up for a little bit easier comp and stronger starts to exit late in Q4 of 2019. So, is there upside to that guide as we look out for the next quarter or two from your expectations or would you expect that to be relatively flat over the course of the year?

No, I think that guidance is – it’d be pretty flat over the course of the year based on just what we're getting from a lot of market information. I think this low-single digits is pretty consistent. I mean we certainly had a nice bump in the Q4 comparables, but again, that was a variance – a very, very soft to 2018. Weather is looking a little bit better than it was this time last year, so that might help us a bit. I think it's too early to make any, any adjustments beyond that low-single digit.

All right. So, no major delta as far as the cadence over the quarters is concerned.

That's correct.

Okay. Maybe sneak one more in. Obviously, return to healthy amounts of $100 million to shareholders in fiscal 2019 including over $60 million of buybacks. We have stocks days in and around current levels. Would you expect a similar amount of share repurchase activity next year? Just any commentary there would be helpful. Thank you.

Again it's Brian. So, we review our capital allocation strategy on a regular basis with our board. And as of now, we don't have any changes to announce but we'll be reporting any updates as we go through the year. As we've talked in the past, we do have that goal to return 50% of the cash flow from operations to shareholders. However, we've been utilizing a bit of a mix of trying to be opportunistic as well as meeting that 50% number.Looking at the current price and the return that we get at various levels and we'll continue those analysis. So, I don't have much more other than that but you're right with the, the current prices as it is today and that far exceeds the average price that we were able to acquire stock back in 2019. We'll have to look at that but we are mindful of the return at the current price and as you mentioned we'll continue to have those capital allocation discussions with the board and see if we making adjustments there but those are, those are ongoing.

Very helpful, color. High class problem either way. I'll jump back in queue if any follow ups. Thanks.

Our next question comes from the line of Josh Chen with Baird. Please proceed you’re your question.

Hi. Just a question on the housing starts. So am I right in interpreting that you talked about the strong starts in Q4 that you haven't quite seen it fully impact your numbers yet and would it then make sense that Q1 would be off to a better start just because you're starting to see those housing starts number flow through?

We talked a lot about the sort of the lag between the housing start number and when we might start to see our product. Again some of it is going to go into the concrete foundations and then the majority of it into framing. And we typically discuss that there could be anywhere between a three to four month lag.It just depends on how well the particular areas prepped for all the infrastructure, plumbing, electrical and all those sorts of things. So certainly it was encouraging numbers in Q4 but I think we have to remember that the increase was against the really, really soft 2018. So yes I would anticipate we should see some of that in the upcoming months.

All right. And then a question on your – kind of a long--term guidance for 2020. Do you expect to achieve basically every element of that – of the guidance because there are certain elements that you may not need to achieve in order to – and you can still hit the overall EBIT margin target for example so you might not have to hit the European margin or even the OpEx reduction. So I was just wondering if you could clarify for us So, I was just wondering if you could clarify for us, are you expecting to hit every element or would some elements be easier than others?

Yeah. We put those targets out in the third quarter of 2017 with the full intent of being able to hit all those targets. I think they're very important for the growth of the company, as well as the profitability of the company. So, as we've stated in this earnings release, we're working extremely hard to be sure that we can still hit all of those targets. As you mentioned, we might be able to hit targets without hitting others, but that's not – our goal is to be sure that we put the people and the resources in place to try and hit all those targets.

All right. Yeah. That's helpful. And last question for me, maybe an inventory. So, kind of a decent improvement in inventory turns over the last couple of years. Any thought in terms of where that could potentially go in 2020?

Yeah. As we mentioned, we've – our inventory has gone from 2 to 2.5 turns. And more importantly, from a pretty significant reduction in our pounds of finished goods. Certainly, what our manufacturing branches are working at is still being able to bring that pounds down and be more efficient. And if we get some normalization in steel, we would also be able to work on bringing down our raw material inventory.So, we don't have a target set for 2020, but we do have all of our manufacturing group working continually every day to be the most efficient they can be. And when those things go in place, we'll start to see that target increase.

Okay. Great. Thanks for your time and good luck in the first quarter.

Thanks, Josh.

[Operator Instructions] Our next question comes from the line of Julio Romero with Sidoti. Please proceed with your question.

Hey, good afternoon, everyone.

Hello, Julio.

So my first question is on the North American segment. Pretty significant lower operating expense year-over-year. Is there may be a more recent reduction you've done there or maybe something unusual you lap from the prior year quarter? You did mention the G&A and that segment was lower by 13%. I mean, is there something kind of unusual there and maybe how much more runway for cost reductions in that segment do you kind of foresee going forward?

Hey, Julio, it's Brian. So, in 2018 we had recorded a settlement for a legal matter and we also had success based fees for management consultant that didn't – neither of those repeated in 2019. So, there’s – those are the primary drivers that we're seeing in North America comparisons and we're going to continue to focus on green lighting projects and initiatives that utilizes SG&A cost, G&A cost and the like. But I don't know how much more significant reductions we'd be looking at because we did have those 2018 items that I mentioned that did not repeat in 2019.

Got it. Understood. And on the European segment, called out relatively flat sales year-over-year on a constant currency basis. Bu, can you just maybe talk about maybe price volume mix? I think was there an increase in one and a decrease in the other one? Any color that would help.

Yes. As we've mentioned, I think, on local currency, they were up 3.5% for the year. Europe tends to do a cadence of a couple price increases. So, typically, there's some January and June type of thing. So that was helpful. Also, I think the change in management there had put in some price increases that maybe had been delayed a little bit. So that was certainly helpful. And I think we're starting to move a little bit more of our fastener volume on that standpoint.

Helpful. And then maybe last one for me here is on the CapEx of $40 million to $43 million for 2020. I think it implies a little bit more growth CapEx for this year. I mean, can you talk maybe about some of the initiatives you have planned for the year?

Not to go into specifics but there are some growth projects in there that are not necessarily the maintenance type CapEx or that kind of annual run rate that we've had. Historically, I think, if I recall the last few years, we've been calling out CapEx in that call it $32 million, $33 million range for the last few years. So, yes, we've got a couple additional projects in there that we'll be looking to initiate this year that are more on the growth side.

Understood. Appreciate you taking the questions and best of luck in 2020.

Thank you.

Our next question comes from the line of Steve Chercover with D.A. Davidson. Please proceed with the question.

Thanks. I wasn't that good on jeopardy in the star one but just a couple questions and there's somewhat follow-ons. So it does sound Brian, like there is going to be some nuance to the repo because I mean there's a 27% difference between what you paid in Q4 and what you paid for the full year, so it's not just automatic, right?

Correct. Correct, not at this time and as I mentioned, that's the – the conversations that we have with our board around looking to utilize both opportunistic versus just share reduction count mix and looking to continue that until we've pivoted off of that position.

And what is it that could, I mean, push you off, presumably not returning the target 50% of cash flow to shareholders, but I mean, presumably, you're filtering it through some sort of return on capital lens and what other items could rise to the front?

I think you touched on it. The current screening, if you will, or the evaluation is the returns at today's price or for those -- for that capital and not to say that we're doing this but versus looking to reduce share count regardless of price and finding if there’s a different balance to those two elements today.We very much utilize the return wins, as we're looking at the share repurchase, and as you noted, it's at a much higher price today than what we saw as an average through the year in 2019. So, again continuing to evaluate the return that – obviously the return for the 2019 repurchases would be much better than they would be at today's level and just making sure we're taking that lens into account.

Do you have any capital projects that would be significantly large enough to soak up some of that capital that could percolate to the top or I mean, is your property, plant, and equipment pretty much where you want it to be and where you want it to be?

That's a good question, and as I noted, too, on the question a moment ago, our CapEx is planned to be a little bit higher in 2020 than 2019, although we're generating a fair amount of cash to be able to fund those with internally generated cash.With the manufacturing footprint, we noted that and we just sold one of our smaller facilities, but I don't know that there would be any significant change to our real estate portfolio mix from where it stands today. But as we evaluate an operation and if they need something that's different than what they have today, we evaluate the buy new – buy again versus leasing and take those on a case-by-case basis.But today we are generating the cash to be able to beat those additional CapEx projects. We'd like to find some larger areas where we can invest in that create returns that enhance our shareholder value. And that's always the goal is putting that cash to use for improving the business with the dividend and the share repurchase as the other elements are capital allocation.

But that said as you maybe contemplate M&A for bolt-ons we've already gone through that over the years and I can't imagine what it would take for that to be to really move up the hierarchy, so, if you kind of refine your focus on wooden concrete. Is that fair?

I think that's fair but we also want to make sure that there’s – we have a push to find fastener acquisition that would help our US domestic North American business. But you're right in that as part of the 2020 plan, we scaled back some of the areas that we are looking to invest in with M&A particularly around concrete, repair type products but with product line extensions or intellectual property or other assets that could enhance our business and we want to make sure we're taking a look at those. We've not found anything of size really recently but we're constantly looking for things that can help us in our strategic initiatives.

Okay. And I might have missed it but is the SAP project coming towards its conclusion?

We have got a another major facility in the US that we're expecting to come online here early in the year and then a couple of smaller operations here in North America. And then that will complete North America which is about 85% of our revenues. But we still have Europe and Asia-Pac to do. So we anticipate by around the end of 2021 to have the rest of those locations completed.

Okay. And final one. Despite walking back a couple of elements it looks like you've come pretty close to achieving your 2020 targets. So, it goes without saying you're probably thinking of some 2023 or five year plans. Would you share those with us in due course?

Yeah. You see that's been a really common question. I think the key is to not take our eye off the ball. We still have quite a bit of work and we want to be sure everybody, employees are engaged in meeting our 2020 goals. There's still quite some aggressive things that we're working on. But as you can imagine from the management team and the board standpoint we're already looking at what some three to five year strategies would be and will most likely get those of refined a bit more and probably be sharing them I would imagine around third or fourth quarter.

All right, we'll look forward to having it. Okay. Thank you both.

Thank you.

We do have a follow up question from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Thank you again, just mostly housekeeping but I missed the cash flow from operations number for the full year, Brian?

Let me pull that. It was $205.6 million for 2019.

Perfect. And then the SAP implementation costs, let’s see, is Q4 a reasonable run rate to think about for the next few quarters?

That's a really good question. I would say the – as we shift from North America to focusing on rest of world, I think that might be in the ballpark. I mean, we continue to refine the plan on who's going where and using local consultants and the like to complement our existing team. But maybe it's a little too early to call on that one right now.I mean we're really focused on getting that – those remaining locations that I referred to just a moment ago. We expect those to be done in the first half of this year. And there's been a lot of focus on prepping and getting ready for those sites. So, I think Q4 might be a decent run rate quarter.

Helpful. And lastly, and you called out the $5.6 million nonrecurring gain in the quarter, are there any other facilities or assets that you might consider monetizing over the next year or so?

No nothing. Nothing in the plan right now.

Helpful. Thank you again.

Thanks, Dan.

Ladies and gentlemen, we have reached the end of our question-and-answer session as well as today's conference call. We thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.