Core Molding Technologies, Inc. (AMEX:CMT) Q4 2023 Earnings Call Transcript

Core Molding Technologies, Inc. (AMEX:CMT) Q4 2023 Earnings Call Transcript March 12, 2024

Core Molding Technologies, Inc. beats earnings expectations. Reported EPS is $0.25, expectations were $0.06. CMT isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello and welcome to the Core Molding Technologies Fourth Quarter Fiscal 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference is being recorded today. I would now like to hand the call to Sandy Martin, Three Part Advisors. Sandy, please go ahead.

Sandy Martin: Thank you, and good morning, everyone. We appreciate you joining us for the Core Molding Technologies conference call to review fourth quarter and full-year results for 2023. Joining me on the call today are the company’s President and CEO, Dave Duvall; and EVP and CFO, John Zimmer. This call is being webcast and can be accessed through coremt.com via an audio link on the Investor Relations Events and Presentations page. Today’s conference call, including the Q&A session, will be recorded. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. I would also like to remind you that the statements made in today’s discussion that are not historical facts, including statements or expectations or future events or future financial performance, are forward-looking statements, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements, by their nature, are uncertain and outside of the company’s control. Actual results may differ materially from those expressed or implied. Please refer to the earnings press release issued today for our disclosures 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. Core Molding Technologies assumes no obligation to update or revise any forward-looking statements publicly. Management will refer to non-GAAP measures, including adjusted EBITDA, adjusted EPS, debt to trailing 12 months EBITDA ratio, free cash flow, and return on capital employed. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release.

Finally, a copy of the press release has been submitted to the SEC on Form 8-K. And now, I would like to call – turn the call over to the company’s President and CEO, Dave Duvall. Dave?

Dave Duvall: Thank you, Sandy, and thank you all for joining us to review our 2023 annual and fourth quarter results. 2023 was an exciting, successful year for the company with significant achievements both in terms of executing our strategic initiatives and progressing on our long-term transformation journey. We’re proud of our team’s hard work and exceptional accomplishments in 2023. We stated in March of 2003, one of our key strategic goals for 2023 was specifically margin improvement. This was driven through our must win battles to improve both our operational performance and working through the product line profitability on some of our larger customer programs to achieve what we see as market based pricing. We have done exactly what we said we would do.

I believe this is an important statement to make. Within 2023, we have significantly improved our overall business model. The result of this accomplishment is directly reflected in our gross margins for the year, which increased by 410 basis points. This is the result of a summation of many improvements attributable to a high performing organization executing to a defined strategy. What I find most exciting is that we’re now in a much better position to focus on growth, which is just our next challenge to overcome. As a quick review, these are some of the 2023 highlights that demonstrate our disciplined approach and commitment to achieving organizational goals. We successfully executed the company’s strategic initiatives and operational ‘Must Win Battle’ projects.

We made targeted operational improvements in key plants that significantly improved the product line profitability and created more capacity with the existing infrastructure. As originally discussed, in March of 2023, we formalized and implemented our companywide continuous improvement systems, leveraging our expert knowledge across the organization to embed a culture of continuous cost and efficiency improvements. We continue to invest in developing our organizational capabilities by expanding our leadership development, technical training programs, internships, and government training grants. This is an ongoing process which is foundational to our organization, creating a culture and environment where it’s easier to succeed is the cornerstone of our current and future success.

We issued Core’s inaugural Sustainability Report in 2023, focusing on advancements in corporate citizenship and our environmental stewardship of the company. The second publication will be in April. We were honored with a Material and Process Innovation award nomination for our development of the Sea-Doo Hull for BRP, which underscores our culture of innovation at Core Molding. At the 22nd National Industrial Meeting, our facilities in Matamoros and Monterrey were honored for their commitment to high ethical standards, practices and sustainability in our Mexican plants. The result of our disciplined execution resulted in full year record net income and earnings per share, strengthened the balance sheet, and generated record cash flows. These accomplishments and the company’s inclusion in the Russell 3000 Index last year were the direct result of Core’s dedicated teams operational performance, winning culture, and dedication to driving shareholder value.

Now turning to a review of our top level financial results, as we previously signaled annual net sales of $358 million were down 5%, primarily due to changing market dynamics and tougher 2022 comparisons. Gross margins for the year increased by 410 basis points to 18%. We also generated over $42 million in adjusted EBITDA, or 11.8% of sales, resulting in meaningful free cash flows of $26 million for the year. Operational performance metrics improved for the full year, exceeded our target of 20%, and created the additional capacity we originally stated. Given tougher prior year comps, we expected softer sales in the fourth quarter of 2023 and cautioned in the third quarter conference call about industrial and utility customers continuing to work through inventories.

Although the fourth quarter is always challenging due to fewer workdays and customer shutdowns during the holidays, we still improved gross margin and adjusted EBITDA margins for the quarter compared to a year ago. Again, this is the result of our organizational ability to execute and deliver on improved product line profitability in the quarter and for the full year, as we had stated at the beginning of 2023. Lastly, yesterday we announced that our board has authorized a new stock repurchase program authorizing the company to purchase from time to time up to $7.5 million of the company’s common stock at current market prices. This buyback program is important because it allows us to opportunistically purchase Core Molding stock, which we believe is a critical component of the company’s capital allocation strategy.

With that, I’d like to now turn it over to John to cover the financials in more detail.

John Zimmer: Thank you, Dave, and good morning, everyone. As Dave mentioned, we accomplished our 2023 full year profitability targets during a changing demand environment that normalized to more typical seasonality as the year progressed. We also had a backdrop of difficult sales comparisons in 2023 versus 2022. Our 2023 total net sales were $357.7 million, down 5.2% compared to a year ago and product sales were down 3.2% compared to the prior year. Product sales were pressured by softer demand for building products and the industrial and utility verticals. During the first half of 2023, higher customer demand levels finally result in customer inventory levels returning to optimal levels or in certain cases, becoming overbuilt.

In the second half of the year, customers slowed demand as they worked through the excess inventory levels. We continue to see customers primarily in the industrial and utility markets work through the inventory coming into 2024. As building products and industrial and utility sales rebalanced their demand levels down, product sales were strong for medium and heavy-duty trucks throughout the year. Our 2023 sales mix for full year shifted to 52% truck compared to 44% truck sales in 2022. In the past, the increase in truck sales would have had a significant negative impact on gross margins, but that impact has decreased over the past several years as we have worked with our truck customers to improve the profitability of their business and return it to a healthy position.

The 2023 full year gross margin was $64.5 million or 18% of sales, an improvement from 13.9% in the year ago period. These margin improvements were primarily due to production efficiencies, favorable net customer pricing and raw material cost. Gross margin was negatively impacted by lower fixed cost leverage for the full year as sales decreased and to a lesser extent by unfavorable foreign currency exchange fluctuations. SG&A expenses were $38.0 million compared to $34.4 million in the prior year period, primarily driven by higher labor and incentive costs, professional fees and a one-time severance expense of $570,000 for the year. Operating income for the year was $26.5 million, up 47% from the 2022 levels. Our full year operating income as a percentage of sales increased to 7.4% compared to 4.8% in 2022.

One of our long-term financial goals is operating income in the 8% to 10% of sales range. This year was a positive step towards that goal. Net interest expense was $1 million in 2023, down 48% from the year earlier. The benefit of the company’s refinancing its credit facility in the second half of 2022 and lower debt balances in 2023 are being reflected in the lower overall interest cost. Another favorable 2023 comparison was against the 2022 loss due to the extinguishment of debt of $1.6 million. Our 2023 effective tax rate was 21%, comprising the weighted tax cost of the three tax jurisdictions where we operate. Our net income totaled $20.3 million or EPS of $2.31 per diluted share, up over 60% compared to $12.2 million or diluted EPS of $1.44 in the comparable year period.

We also delivered a strong 2023 adjusted EBITDA, a record $42.3 million, or 11.8% of sales, an increase of 330 basis points from 8.5% in 2022. Now, turning to the fourth quarter results, net sales were $73.8 million compared to $86.4 million a year ago. Product sales were down 12.9% on a difficult comparison to 2022 product sales. We had indicated at the end of the third quarter that we were seeing a return to normal seasonality and customer demand reductions due to inventory levels. We anticipated this decreased in the fourth quarter. Gross profit for the fourth quarter was $10.9 million, or 14.8% of sales, an improvement compared to 13.4% of sales in the prior year. In Q4, the company reduced its material, labor and overhead costs as demand decreased.

The company’s ability to react quickly to reduce variable costs, which is about approximately 70% to 75% of sales is critical to maintain our profitability and cash flows. In Q4, the company was able to reduce costs quickly, which provided for higher gross margins than in 2022 even with lower sales. Fourth quarter SG&A expenses were $8.4 million compared to $8.6 million in the prior year. Q4 operating income was $2.5 million, or 3.4% of sales, flat against last year’s 3.4%. Operating income as a percent of sales did not benefit similar to gross margin percentage as we lost leverage on fixed and SG&A costs due to lower sales. As we proceed in 2024, the company will monitor its fixed and SG&A costs and adjust the costs if necessary based on sales levels.

The company is focused on long-term growth and will retain the infrastructure required to grow the company. Net interest expense decreased by 61% compared to the year ago quarter due to debt pay downs from last year. This year’s focus on operational improvements generated free cash flows that allowed us to eliminate borrowings and earn interest income on cash reserves. For Q4, net income was $2.2 million, or $0.25 per diluted share versus last year’s diluted EPS of $0.57. Recall that we reported $2.4 million income tax benefit from reversing cumulative valuation reserves related to NOLs last year. Excluding the 2022 tax benefit, diluted EPS last year would have been $0.29 per share. Adjusted EBITDA for the quarter was $6.5 million, or 8.9% of sales, up 190 basis points from the prior year’s EBITDA margin of 7%.

Based on our actions and strategic initiatives, we are pleased with our over – year-over-year improvements in gross margin and adjusted EBITDA. Our GAAP to non-GAAP reconciliation tables are at the end of our press release. Turning now to the company’s financial position, starting with a discussion of cash flow, 2023’s focus on operational improvements resulted in higher profitability and significant cash flow generation. The company’s cash provided by operating activities was $34.8 million for 2023, which compared favorably to $19 million in 2022. Capital expenditures for the year were $9.1 million and free cash flows for 2023 were $25.7 million compared to $2.4 million in 2022. We expect capital expenditures in 2024 to be approximately $13 million.

We ended 2023 with total outstanding liquidity of $74 million, which includes cash and cash equivalents of $24 million and $50 million available under the revolver and capital credit lines. The company’s term debt balance was $23 million at the end of the year and our debt to trailing 12 months EBITDA ratio was less than 1 times. Our working capital continues to be well managed and netted to $57 million at the end of the year. Finally, our return on capital employed, a pretax return metric was 16.4% on a trailing 12-month basis, which exceeds our targeted range of 14% to 16%. Today, we want to share our 2024 outlook for sales. These estimates combine industry projection, customer forecast and price changes as well as expected new program launches and a material program end.

We expect 2024 annual net sales to decrease by 10% to 15% compared to 2023. Our sales outlook includes a cyclical demand slowdown in truck, stabilizing customer inventories, as well as consumer demand environment that is more consistent with pre-pandemic levels. Also, beginning in the second half of 2024 and continuing through 2026, Volvo is transitioning from an existing truck model to a new model that that Core is not part of. Notwithstanding this Volvo transition, we are actively bidding on new Volvo business and believe we are well positioned to secure future programs outside of the current programs. We have a good relationship with Volvo and remain highly focused on new programs from Volvo and new projects from other customers. We will continue working on profitability initiatives with a focus on additional continuous improvements across all product lines, which we forecast will allow us to maintain full year gross margins in the targeted range of 17% to 19%, with some quarterly gross margin levels outside of this range due to seasonality and onetime events.

I’ll let Dave further discuss our plans and outlook for this year. With that, I’d like to turn it back to Dave. Dave?

Dave Duvall: Thank you, John. For 2024, we’re focused on offsetting certain end market headwinds, truck cyclicality and end of life programs. Industry projections for 2024 in North America Class 8 truck market, which still make up half of our revenue, calls for a cyclical correction in 2024 compared to 2023, with expectations for truck demand to rebound in 2025 and 2026. We have seen a slowdown in demand for power, sports and industrial utilities, which are interest rate sensitive and seeing some return to pre-pandemic levels. We have aggressively ramped up our lead generation and quote to cash processes to offset slowing demand and to grow our business. Same as with our 2023 commitments, this is another opportunity that we will drive to success.

We’ve already won $17 million of new business that will launch at the end of 2024 through 2025. These wins are in addition to wins for new business that replaces existing business as programs come to end of life. We also have a new business opportunity pipeline of over $150 million which we’re actively pursuing. Our sales strategy remains intact with the primary driver being to continue to diversify our customer base through technical solution sales that provide our customers with unique solutions to their challenges. Our process offering capabilities provide lightweight, durable low cost, recyclable solutions that strategically position us to benefit from current market conditions such as infrastructure spending, manufacturing and reshoring and overall growth in the industries we serve.

We continue adjusting our cost structure to match current sales projections, while sustaining operational improvements. The operational and product line profitability improvements we made in 2023 and cost structure changes in 2024 put us in a better position in 2024 to maintain solid gross margin levels even with lower customer demand. Our operational improvements to date and in the future make our asset utilization more efficient, resulting in additional capacity. We believe we now have capacity in place that can generate between $425 million to $475 million of annual product revenue, which will allow us to continue growing the company. We continue to manage our capital allocation strategy, which includes evaluating M&A opportunities, we have prioritized revenue and customer diversification as part of our acquisition strategy.

This includes adding capacity and process offerings and expanding our footprint in North America to new areas where we see good opportunities for future growth. The size and price of an acquisition matters, we do not plan to over lever the company or overpay for an opportunity, especially in a choppy demand environment. We will plan to deploy capital carefully and prudently. Our 2023 must win battle successes helped us gain sustainable margin improvements and prepare us for growth, which was the plan from the beginning. We have now scaled our operational excellence systems across the organization and we’ve created an organization that can execute well. The foundation and technical resource capacity is prepared for growth as we look to invest capital to support our long-term growth plans.

We will continue to manage the business with discipline and purpose as we navigate internal and external factors impacting our business. Although 2024 will reflect some choppiness at the top line, we believe we built a resilient organization that is well positioned for growth and long-term shareholder value creation. We appreciate the continued support from our customers, employees, shareholders and Board members. So with that, I’d like to open the line for questions. Operator?

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Q&A Session

Operator: Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Today’s first question comes from Tim Moore with EF Hutton. Please go ahead.

Tim Moore: Thanks. John and Dave nice work on the strong free cash flow for the year. That was impressive, even considering the decrease in the CapEx. I like the gross margin expansion. But regarding your 2024 sales decline guidance, how much maybe annual sales is that Volvo new model that you won’t participate in? The one that you currently do, that will be rolling off.

Dave Duvall: Yes. So Volvo will be a phase out. It’s actually several different programs that are part of different product families. It’ll only be about maybe $8 million to $10 million for this year. And then the remaining would phase out over 2025 and 2026. The total sales in 2023 for Volvo was about just over $50 million.

Tim Moore: No, that’s good. So when you kind of talk about the following two years, 2025 and 2026, if it’s $8 million to $10 million this year, how much do you think it’ll be combined the following year?

Dave Duvall: It’ll be about $8 million to $10 million this year and then probably the 70% of that in 2025, and then the remainder in 2026.

Tim Moore: Okay, that makes sense.

John Zimmer: Tim, we’ll still have some business with them at the end. We still do some programs that are not on the major model that’s changing out. And so we will still retain probably somewhere around $10 million of business.

Dave Duvall: Right.

Tim Moore: I figure that. Yes, because they had the Mack truck strike, right. That was a little bit of an impact in the fourth quarter?

John Zimmer: Yes. And also the Bronco strike on the first quarter like this…

Tim Moore: That’s helpful. I want to just kind of touch a little bit more. I mean, I think you just explained mostly the difference maybe before what I was expecting for this year versus the Volvo impact. But are there any other end of life phase outs this year that are impacting you that are notable?

John Zimmer: No. Not really. I think the bigger thing with this year is, we’re seeing the first two quarters of last year were really high quarters customers, especially personal watercraft, ATV utilities. They were still building that inventory. And this year, I think we’re going to see those levels come back to normal levels. And so some of our guidance is more about those industries probably for the first half of the year, coming back to a little bit more normal levels and burning through some of that inventory that they build up over time. And then the second half of the year is probably for us a little bit more reasonable and comp standpoint, because it seemed like most people had figured out what they were doing with their inventories by about June 30 last year, or sometime in the third quarter. So really most of that’s going to be the first half of the year. Real tough comps. And then I think it kind of evens out as the year goes on.

Dave Duvall: Yes. At the beginning of 2023, it was really build and deliver at all costs on a lot of the, especially on truck, personal watercraft is there, filling the pipeline and industrial.

Tim Moore: That makes sense. A commercial vehicle, I cover [indiscernible] engineering, and I know they’re guiding for the commercial vehicle truck area to be down just on restocking and normalization. But I like when you mentioned the 70% to 75% cost structure. So it seems like you gave the 17% to 19% gross margin guidance. Would I be off base by thinking you’re facing easier comparables in the second half of the year? Maybe the sales won’t be down as much in the second half as in the first half, depending when that Volvo starts rolling off. But with your cost structure being so variable, should we forecast or model second half gross margin better in the first half?

John Zimmer: I think you hit the model right on the head. Is that our job and it’s always been this company’s job, is that with variable costs somewhere between 70%, 75%, it’s how fast we react and get rid of the cost. And so I do think, yes, I would say the second half of the year will be a little bit better than the first half. I think even second quarter would probably be maybe even better than first quarter, just because we’ve already reacted very quickly to a lot of that. Some of the severance costs you saw that we mentioned in Q4 was us changing ship structures at our plants, plants that were running 24/7 now back to a 24/5, those types of things. And so we’ve been moving quick. But, yes, I would kind of think that way is that the first quarter might be the softest and then second goes up and then third and fourth, other than fourth being normal seasonality with shutdowns and everything else, but the middle of the year probably being a little bit better than the first half of the year.

Dave Duvall: First quarter of the year.

Tim Moore: That makes sense. That’s really good color. Dave mentioned, I think he said $150 million customer pipeline. Are there any new OEMs qualifying this year? And if not, are there any big ones looking to do a big line with you?

Dave Duvall: Yes. We have several new customers. We got a new customer in the truck area that we just won this year. We also have, I think, really two big programs that we’re looking at and quoting on right now in the pipeline for industrial, for either the lids or the vaults that get buried in the ground for the data transmission or energy transmission.

Tim Moore: That’s great. That could probably be pretty big. And then my last question, not to hog the limelight here. I believe you mentioned there’s 425 million to 475 million sales capacity in place. But just regarding acquisitions, are presses still the top priority, or is there anything else you’re looking at in the funnel when you rank it?

Dave Duvall: Yes. I don’t think, I really – I think the work that we’ve done to as far as getting the capacity out of what we have, plus the capacity that we installed in 2023. I think we’re where we need to be with capacity for, at least for most of our parts. Really for the M&A strategy, we’re really looking at industries with growing our current sales channels to be able to build that with all the other processes that we have, getting into more industrials, water treatment and construction projects, those sales channels to strengthen those so that we can then grow the wallet share with that sales channel with our other processes.

John Zimmer: Yes, Tim, one of the things that we keep running up against is the Build America, Buy America challenge with the Infrastructure bill. There’s a requirement that stuff is built in America, United States. We do have one of our processes that we do not currently do in the United States. So we are actively looking about how do we get that process in the United States. Would it be better to acquire into it or to try to buy some presses and get them up and running? So we’re definitely looking at how do we take advantage of the Build America, Buy America, all our other processes we do in the United States for the most part. So we’re good there. And then I think we’ll also look at a little bit of our footprint. We still are a company that make large parts, so where you’re located is very important.

And so some of our strategy might be to continue to build up a little bit Southwest and see how we can maybe get across the United States a little bit more with all different processes and have additional locations, maybe more in the Southwest.

Tim Moore: Great. That’s really helpful granularity and color. Yes, no, I wish you luck with the year. I actually think like the other company I cover. Hopefully you’re being conservative on sales guidance and you get to the fourth quarter lapping things, these stocking could be done and maybe some normalization. So you could have maybe a decent second half of the year on the top line, at least. So thanks a lot. Appreciate it.

John Zimmer: Thanks, Tim.

Dave Duvall: Thanks.

Operator: Thank you very much. [Operator Instructions] The next question comes from Bill Dezellem with Tieton Capital. Please go ahead.

Bill Dezellem: Thank you. Would you please discuss the building products revenue decline from 5 million last year Q4 down to 2 million or so this year?

Dave Duvall: Yes. It was quite an abrupt change for us. We were actually had several programs that were getting ready to launch, and we were already supplying product. And a lot of the customers were basically saying, we’ll take everything that you can build. And when we did that, I think they have a lot of areas to store inventories, whether that’s in their warehouses or at job sites. So you’ll see a lot of the large stormwater drains, vaults, lids, things like that that are already outside. They store them outside. And I think when they started seeing some of the volume decline, they looked at their inventories and reevaluated their inventories and really put a slowdown on consuming that inventory near year end and into the beginning of this year. We’ve talked with really every customer as far as when they expect the demand to come back. Right now they’re telling us sometime near the end of Q1.

John Zimmer: And, Bill, I think maybe you mentioned building products kind of in that concept, so our building product is primarily one customer.

Bill Dezellem: Yes, I was talking industrial utilities.

John Zimmer: Yes. And so I think you kind of said building products, which kind of Dave did a good explanation on that one. On building products we deal with one customer that does big box retail. And so we’re a little bit subject to the programs they have at the big box retailers. And again, we produce their lattice, so we have all their lattice and it really is their structure, their sales throughput with the big box retailers and how many stores they have and those types of things and so at this point I think there’s been a little bit of a slowdown in that area and not totally clear, but I’m sure the person we sell to has different situations going on with the building or with the big box and what they’re selling and those types of things.

But we’re still selling lattice to that customer the Universal Forest Products and still have a real good relationship with them. And so we really count on them to drive the sales, they drive the sales into the big box. We produce the parts for them.

Bill Dezellem: Okay, just to be clear then, that it was your utility business that saw the slowdown, really that abrupt decline as they reviewed their inventory. And then Universal Forest Products was the one that had the slowdown basically as a result of the Home Depot Lowes’ seeing their sales slow. Did I interpret kind of those pieces correctly?

John Zimmer: Yes. That’s correct, yes.

Bill Dezellem: Okay, excellent. And that just to be clear, that would be under the industrial and utilities category, the first answer. Not in the all other category, which saw a pretty big decline from Q3, is that correct?

John Zimmer: Yes. The specific inventory adjustment was industrial and utilities.

Bill Dezellem: Okay, excellent. That’s helpful. And then I am going to just jump back to the all other category where revenues declined from Q3 at $12.5 million or so, and then went to Q4 more like $5 million, $6 million. That was also a pretty abrupt decline. Would you walk through that phenomenon also for us, please?

John Zimmer: Yes. I mean, really what we see usually in the Q4 time period is the all other will be from seasonality standpoint. When you look at Q3 to Q4, we’ll usually have a normal slowdown. A lot of those will be where we’re doing programs for customers that were overflow business on those types of things. And as they slow down in that quarter, they’ll pull back from us. From that standpoint, we see those types of sales coming back slowly over time because we are in the all other, in certain situations, overflow molder. And so as they start to ramp back up in the Q1, Q2 [ph] time period, we’ll start to pick up from that standpoint and pick up some of their business back up.

Bill Dezellem: That’s really helpful, John, and what are the products that see that seasonality?

John Zimmer: So some customers, like a customer, what we disclose is ORBIS, they’ll do packaging for the auto industry and during that time period, and when I say packaging, returnable packaging, big crates that are returnable packaging and used in the industrial market, those types of things, those will be where they mold some themselves, but they also outsource to us some of their molding. And again, during Q4 is usually a very slow time period for them anyways. And so at any given time we’ll have tools going back and forth between us and them and they’ll send us over tools and ramp up for a quarter or two and then kind of take a tool back and then give us some additional tools. And so stuff like that where Q4, by nature in those industries are just slow.

We don’t see a lot of tools moving back and forth. We kind of just kind of at that point are doing what’s left, and then, like I say, they start bringing those tools back to us. Q1, Q2, as the year goes along, those types of things.

Bill Dezellem: Great. Thank you both for the time.

John Zimmer: Yes, thank you.

Operator: Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to Mr. Duvall for any closing remarks.

Dave Duvall: Thank you for your continued interest in our company. We’ll be participating in the upcoming Roth Conference in March. If you’re interested in a meeting, please contact your Roth representative. We look forward to providing an update on our progress when we report our first quarter results in May. So have a great day. Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.