Kevin Cavanah: I mean, we’re entering our refinery turnaround cycle. Basically, now we’re sort of in it. Majority of our refinery turnaround work is located in the Pacific Northwest. And, I don’t know if there was anything unusual this year versus last year, I would say I’d probably point it as sort of an average turnaround cycle for us in the facilities that we work.
Brent Thielman: Thank you. And one more question. So you mentioned some favorable direct margins. Are those continuing to get better with New York – with the work awarded in New York, or I guess in other words, do the bid margins keep moving higher because the market’s so busy right now?
John Hewitt: I think what I would the way I would look at it is When we look at the margin performance in the first half of fiscal 2024, we’ve had some good project closeouts. On completing some projects that have moved that margin up. I’m really overall strong execution by our field that has helped that. I think that’ll be replaced by the quality backlog that we’ve got. Those projects should lend themselves to a similar level of margin. So I wouldn’t expect – we’ll continue to strive to – maximize the direct margin performance but I wouldn’t expect, direct margins to go significantly higher than our the 10% to 12% range that we’ve talked about being the normal range for the business. And you also need to remember that 30%, 40% of our business is reimbursable and a lot of maintenance activities, that type of work, really good work for us.
But it leads itself to a lower margin profile. So instead of double-digit margin for we’re in the high single digits for that type of work.
Brent Thielman: Perfect. I appreciate the color. I’ll hop back in and let someone else ask some questions.
Operator: Looks like we have a question from John Franzreb of Sidoti & Company. Your line is open.
John Franzreb: Thank you. John, just back to the hydrogen discussion, I might have missed this. You said it was small, but put it in context how much business you do in the hydrogen market. What do you think maybe the potential is and the timeline for realizing that kind of a potential?
John Hewitt: So I think, you know, obviously, it’s about, you know, how fast the at least the U.S. transitions to a higher percentage of hydrogen in the energy mix. I think we feel pretty comfortable long term that hydrogen will take a larger position in the U.S. energy mix. Whether that’s for, certainly in industrial processes, but, for, as a, a fuel for transportation fuel, and then for, some kind of a mix or blending for power generation. So I think what you’re seeing, what we’re seeing right now is a lot of, kind of foundation for us, laying the foundation for that future, were a lot of time spent on marketing, time spent on providing feasibility and FEED studies to various clients to help them with their decision making profile on what their next steps are, picking up an occasional, storage sphere or an occasional, maybe smaller, hydrogen processing facility.
So I think it’s gonna continue to grow for us. So but I think, you know, we’re probably a couple of years away from a hydrogen, from a material impact on our backlog and revenues from hydrogen. That said, you know, I would expect here over the next 12 to 18 months, and we’ll continue to add small hydrogen related projects into our backlog and that should continue to grow over the subsequent years.
John Franzreb: Understood. And just a little bit about the leverage discussion. Kevin, you suggested that the second quarter SG&A was artificially low, due to timing of, I guess, bonus accruals and other items. But you also said that you expect to leverage the SG&A line rather significantly in the year ahead. So how should we think about SG&A, on a go forward basis, similar to maybe the first quarter? marginal increase. Just any color on that line would be helpful?
Kevin Cavanah: I think the second half SG&A will probably be higher than the first half was. The variable accounting on cash settled stock based compensation. We’ll have a higher expense. We also anticipate increased, project pursuit cost as we continue to work to build the backlog and then you know, than just some other targeted increases that we’ll need just for the added revenue volume that comes. The way I think about SG&A is we’ve got a target out there we’re trying to get the SG&A to 6.5%. I think we’ll make a significant move toward that especially in the fourth quarter. I’m not sure we’ll get all the way there, but we can definitely get, a much closer. Hopefully, we get to 7% or lower. And then then I think that’s achievable mark in fiscal 2025.
John Franzreb: And when you talked about asset relocations, just about moving guys from, personnel from process into utility in stores, not adding, additional personnel. Am I understanding that properly?
Kevin Cavanah: Yes. For the there’s really two aspects of the construction overhead. So first of all, when we talk about reallocating resources, we’ve talked about the fact that our staffs can work in multiple segments and if you look at the volume of revenue that was flowing through the process and industrial facility segment last year, it was definitely a higher percentage. That we completed some of that work, and I mentioned that we’re kind of in a low period here before additional work kicks in. So those resources are being allocated toward the other two segments. And when we try to put a little more color on those resources, what those are, that’s all the project management, the quality, the safety, all that infrastructure we have in place to execute the projects will be more focused on those other two segments, in the second half of the year than they were in, say, the prior year.
