Dennis Scannell: Yes. Good morning, gentlemen. Just a couple of quick things for me. So following on some questions about the rental business, which has really been a standout performer for the year. So one of the things I did notice was that, boy, a real nice improvement in gross margins really on a sequential basis, looking at it quarter-by-quarter, starting the your fiscal year at like 54.9%, exiting at 76.5%. And so I’m just kind of curious, was that because of different utilizations? Was it because of pricing action taken through the course of the year? Yes, if you could just shed some light on that.
Robert Curda: I think a lot of it has a lot to do with utilization. Units that are out in their customer’s hands don’t require us to repair them, keep them charged or do other activities that drag down the gross profit for items that are out on rent when we have things sitting here on the shelf. So that’s part of it. We also had, across the company as a whole, a higher utilization of the factory because we’re building these mariners that are going out into this customer’s hands. So as a result of that, we have higher utilization out on the factory floor, higher absorption of fixed costs, which improved gross profit also.
Rick Wheeler: I think the move that we made, sorry, bringing our Langfield facility over into our Pinemont location certainly was a cost-reducing mannerism as well, which is going to contribute to gross margin.
Dennis Scannell: Okay. But the overhead absorption from the production and the plant consolidation, wouldn’t that be captured in the product gross margin as opposed to the rental gross margin? Just for clarification.
Rick Wheeler: From a maintenance point of view, as Robert pointed out, when those units are here, then they require maintenance in terms of keeping charge, touching them, there are various things that go on when they’re in our hands and not in the hands of the customers. Those costs were being absorbed by what went on at Langfield. Now they’re going on here. And so that gives a little bit better control of them.
Dennis Scannell: Okay. So — and again looking at just the rental gross margins exiting the year at 76%, is that something that we can look for going forward? Or was that kind of an extraordinary performance in the fourth quarter? And now mid-60s, 60% to 65% is more a normal level on a go-forward basis?
Robert Curda: There’s going to be factors that affect that. Obviously, utilization is going to affect that we have these new units coming into the fleet that are going to have fresh depreciation that’s going to affect that also. So I think this last quarter just has the benefit of just really favorable things happening, and I wouldn’t expect that going forward.
Rick Wheeler: I think as well we mentioned that there will be some gaps in some of the OBX rentals. That means they’re going to be back here, and so we’re going to have some higher expenses in the maintenance of that. So there’s going to be some ebb and flow to that, that makes it a little bit unpredictable.
Robert Curda: Absolutely.
Dennis Scannell: That’s fair. So — and do you see the Mariner nodes is kind of cannibalizing OBX potential?
Rick Wheeler: The market is — yes, it’s a good question. The market is in an expansive mode at this point. I mean the ocean bottom node in the marine seismic industry is really where most of the activity and any sort of growth seems to be at this point. There is improvements overall in the marine industry, including some of the total streamer operations. So I don’t want to imply that there’s nothing going on there. But I do think that the extreme data quality that the library houses and the oil companies have grown now accustomed to from this ocean bottom data really makes them the preferred method whenever possible to do these seismic surveys. So I don’t know that there’s a cannibalization, I wouldn’t really call it that. I think there is an expansion going on in the market.
Clearly, the Mariner will serve in the same functional role as the OBX, so it has that capability of displacing it. But it’s new technology as well. It has features that the OBX doesn’t have, and that should extend its acceptance further into the market.
Dennis Scannell: Yes. Okay. Fair enough. And then just maybe to push you a little bit on capital allocation. You finished a great year relative to the recent past you look like a real company. We’ve got GAAP net income, really nice cash flow generation, a very attractive multiple. You’re trading above book value now, but you’re sitting there with $33 million in cash. And if we’re looking at strong market demand and some spending that we’re doing on our rental fleet, is it time to think about repurchasing stock? Or just kind of thinking about if you could help us think about your capital allocation strategy going forward?
Rick Wheeler: No, that’s certainly something that our Board considers on a regular basis. We do want to make sure in our conservative management, which we mentioned before, is something that keeps us where we are, to be debt free and to be able to fund our operational components as we go forward. So that doesn’t preclude the possibility of a stock buyback, again, similar to what we did before. But we will be very cautious about that. But the Board will be considering that as it always does over the course of time.
Dennis Scannell: Okay. Fair enough. Good luck. Thanks again.
Rick Wheeler: All right. Appreciate it. Thank you.
Operator: And we have our next question from Scott Bundy with Moors & Cabot.
Scott Bundy: Good morning, guys.
Rick Wheeler: Hi, Scott.
Scott Bundy: Couple of questions. Good morning. Are there minimum volume associated with the contract with Itron?
