Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) Q2 2024 Earnings Call Transcript

Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) Q2 2024 Earnings Call Transcript July 31, 2024

Universal Stainless & Alloy Products, Inc. beats earnings expectations. Reported EPS is $0.9, expectations were $0.52.

Operator: Good day, and thank you for standing by. Welcome to the Universal Stainless Second Quarter Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, June Filingeri. Please go ahead.

June Filingeri: Thank you, Jessinda. Good morning. This is June Filingeri of Comm-Partners and I also would like to welcome you to the Universal Stainless conference call and webcast. We are here to discuss the company’s second quarter 2024 results reported this morning. With us from management are Chris Zimmer, President and Chief Executive Officer; John Arminas, Vice President and General Counsel; and Steve DiTommaso, Vice President and Chief Financial Officer. Before I turn the call over to management, let me quickly review procedures again. After management has made formal remarks, we will take your questions. Our conference operator will instruct you on procedures at that time. Also please note that in this morning’s call, management will make forward-looking statements.

Under the Private Securities Litigation Reform Act of 1995, I would like to remind you of the risks related to these statements, which are more fully described in today’s press release and in the company’s filings with the Securities and Exchange Commission. With these formalities complete, I would now like to turn the call over to Chris Zimmer. Chris, we are ready to begin.

Chris Zimmer: Thank you, June. Good morning, everyone and thank you for joining us. The second quarter was a period of significant achievement for Universal. Sales reached a record $82.8 million, gross margin hit an all-time high of 25.4% of sales, record net income of $8.9 million or $0.90 per diluted share and adjusted EBITDA was a record $18.5 million or 22% of sales. Our ability to achieve this level of sales and profitability is the direct result of our strategic focus and capital investment in our aerospace market capacity and capabilities namely in premium alloys and other critical products for commercial aircraft and defense applications. That focus has delivered a richer product mix and a broader base of customer approvals in a market with substantial growth potential for the foreseeable future.

As evidence of our progress, we achieved record aerospace market sales of $68.6 million in the second quarter, representing 83% of total sales with premium alloys at 25% of total sales, mainly driven by aerospace. An important profitability driver is the targeted and sustainable margin improvement projects we continue to put in place. These projects combined with the change in our mix towards aerospace and premium products, represent a structural change in the level of margin we are achieving. The acceleration of our margins in the second quarter and the growth of our adjusted EBITDA, which increased 47% quarter-over-quarter and 135% year-over-year are indicators of this new level of profitability. Additionally, our second quarter benefited from higher base selling prices along with stabilizing commodity prices.

We continue to invest in our premium alloy capacity and we are adding a second 18-ton furnace shell for the VIM at our North Jackson facility in the middle of 2025 and a new box furnace this quarter to support growth at the forge. We also remain fully focused on managing working capital and generating positive cash flow to fund our strategic capital expenditures as well as paying down debt. In the second quarter net cash generated by operating activities totaled $7.3 million and total debt reduction was another $3 million, bringing the total debt reduction over the past four quarters to $15 million, a decrease of 16%. Backlog remained solid at $297 million at the end of the second quarter versus $325 million at the end of the first quarter.

We are continuing to work with customers to manage order entries in order to pull in lead times, which better serves them while strengthening our competitiveness. From an operations standpoint, total production in the second quarter was up 4% sequentially, that follows a 12% sequential increase in the first quarter, as we further benefit from our Capital Modernization Projects throughout the plants. Through those projects we are realizing process improvements and an increased stability in our manufacturing process, enabling our production levels to ramp. There was positive news on the workforce front earlier this month, with the signing of a new five-year Collective Bargaining Agreement with the hourly production and maintenance employees at our North Jackson facility.

It’s a good contract; serving the best interest of our employees, our customers and our shareholders. The capabilities of our North Jackson facility and our capital investments there have an essential role in our growth strategy. A further positive development in the second quarter was the return of Universal Stainless to the Russell 2000 and 3000 indexes. We believe it reflects our substantial progress over the past year, in achieving our growth objectives and in building value for our shareholders. Turning to our end-markets, let me begin with Aerospace. Second quarter sales were a record $68.6 million, up 14% from the first quarter and up 34% from the second quarter of 2023. Year-to-date sales increased 29% to $128.8 million. I’ve just returned from the Farnborough Airshow, where the enthusiasm and optimism about the future of the aerospace market demand remains as strong as ever.

The importance of the show for Universal was the opportunity to make further inroads in expanding our base of major customer approvals as well as in deepening current customer relationships on both commercial Aerospace & Defense, we were successful on both fronts. As expected, Boeing and Airbus announced major deals at the show. There were encouraging wins for Boeing, including an order for 20, 787 Dreamliners for Japan Airlines, an order for 20, 777-9s from Qatar Airlines. Airbus also won orders including one from Japan Airlines for both wide-body aircraft and a single-aisle 321neos. Boeing’s focus at the air show was on safety, quality and their plan to meet customer commitments. While Boeing recently pushed back by a few months their production plans for the 737 MAX.

COO Stephanie Pope, told reporters at the air show that they are seeing significant improvement in the flow of their 737 factory and she confirmed their production target of a steady rate of 38, 737 MAX airplanes per month by the end of this year. sThey also plan to return to producing five 787s per month later this year, as the supply of parts continues to improve. To-date Boeing has continued to work with the supply chain to ensure reliability and sufficient inventory for the ramp-up in production rates. While our customers are closely monitoring the recent pushback in production target dates, we have only seen minimal order adjustments and there have been no cancellations. Confidence in aerospace demand is based on the fundamentals underpinning the commercial, Airplane and Defense aerospace market which point to an extraordinary and sustainable growth opportunity.

Not only has air travel recovered to pre-COVID levels, but TSA screened a record three million passengers on July 7. The surge in air travel and forecast of continued growth are driving up demand from airlines for new more fuel-efficient planes, to replace aging aircraft and support their fleet expansion plans. The need is increasingly urgent, as airlines have had to postpone route expansions as they await overdue deliveries. Somewhat ironically, the delay in new planes is driving another aerospace segment, the parts aftermarket and MRO, which we estimate to be about 5% to 10% of our Aerospace business. The potential size of the commercial aerospace market can be seen in the combined net bookings of Boeing and Airbus, which totals more than 14,000 aircraft.

All of this translates into a substantial need for premium alloys today and in the years to come. Strong fundamentals are also driving demand in defense. Ongoing geopolitical conflicts have resulted in record global military spending which reached $2.4 trillion in 2023 including increased military budgets at NATO countries. In the US, $884 billion defense budget for 2024 is aimed at modernizing weapon systems and technology, and expanding capacities and capabilities for advanced jet fighters, military helicopters, drones and combat vehicles, all require specialty and premium alloys. The defense industry is a growing and increasingly important part of our aerospace sales representing 15% to 20%. That demand combined with strength in commercial aerospace and the extensive number of new OEM approvals that we have received in recent years are the primary drivers of our overall growth.

Our company is in the strongest position we have been in to respond to the aerospace market opportunities. Turning to the balance of our markets. Heavy equipment market sales were $5.2 million or 6.3% of the second quarter sales which is 11% lower than the first quarter. Customers remain hesitant to build inventory in the face of changing market demand for EVs versus hybrids and gas engine vehicles. GM for example saw second quarter sales strengthen in gas-powered vehicles while the pace of growth of their EV models slowed. Given the slowing pace of EV demand growth they are pushing back plans for a new Buick electric vehicle, although they do plan to introduce other new EV models in the coming months. Model changeovers are a positive driver of tool steel demand, whether for gas-powered, hybrid or electric vehicles.

We expect our heavy equipment market sales to pick up later in the year and in 2025 demand to return to historic robust sales levels, post-election once the automotive industry has better clarity and direction and the confidence to make substantial investments into new production lines. Energy market sales totaled $5.1 million in the second quarter or 6.2% of sales, which is 15% lower than the first quarter, but up 17% from the second quarter last year. The energy category combines our oil and gas and power generation sales which we reported separately prior to 2024, and better reflects our strategy in the energy market, as we have shifted production capacity to aerospace products in recent quarters. We plan to increase our energy market sales in future quarters, as our production capacity continues to expand.

General industrial markets totaled $3.3 million or 4% of sales in the second quarter, which is 22% lower than the first quarter, but up 3% from the second quarter last year. We had expected our sales in this market to grow which are mainly from semiconductor manufacturing, but general industry demand continues to remain modest. The long-term prospects in this market remain positive as US semiconductor sales are continuing to gain traction amid the rapid development of AI and as semiconductor manufacturing returns to the US with the help of the CHIPS Act. We expect our general industrial sales to improve post-election and remain poised to benefit from strengthening market dynamics in 2025. Looking at the balance of the year, our strong backlog puts us in a great position to increase sales next quarter and further expand our margins, generating more free cash flow from operations.

Now let me turn the call over to Steve for his report on our financials.

Steve DiTommaso: Thanks, Chris. Good morning, everyone. As you can see in the numbers, our sales growth has continued in the second quarter consistent with our expectations. This is fueled by the effort from our team to execute on a robust market for our aerospace products, delivering record top line quarterly sales of $82.8 million. Our overall shipment volume increased compared with the first quarter by 2%. This included a strong increase in the aerospace end market shipments, partly offset by lower shipments in the heavy equipment end market driven by soft demand and lower shipments of conversion services. Our expectation is strong recovery for heavy equipment in 2025 after completion of the US election cycle later this year.

Additionally, continuous improvement projects layered throughout the organization have delivered lower costs and better yields. This has delivered record profitability as measured by gross margin, operating income, net income, EBITDA or adjusted EBITDA. Our diluted earnings per share of $0.90 trails only the fourth quarter of 2017, which benefited from tax adjustments driven by new tax laws and two quarters from much earlier in the company’s history when the diluted share total was much lower. Gross margin totaled $21 million in the first quarter or 25.4% of sales compared with 18.9% of sales last quarter and 14.3% in the first quarter of last year. The significant sequential improvement is primarily driven by three sustainable factors. First, the impact of cost and yield initiatives executed to specifically improve product profitability, also a richer mix of aerospace products, and finally the ongoing recognition of our higher base prices.

Our expectation is to continue to drive profitable growth for the foreseeable future through execution of the margin project initiatives, while maximizing our supply to aerospace and defense. Selling, general and administrative costs totaled $8.2 million in the second quarter compared with $7.4 million in the first quarter and $6.8 million in the second quarter of last year. Quarterly SG&A has increased compared to 2023 due to higher employee-related costs, business insurance expenses and audit and accounting support expenses. We expect SG&A to approximate $8.5 million per quarter through the second half of this year. Our operating income for the quarter is $12.8 million, which is a company record. We committed on our last two calls that we will see meaningful operating income growth each quarter as the impact of the margin initiatives fall through to the income statement and we realize the benefit of the 16 price increases that were announced over the last three years.

There is more good to come from both of those factors in the balance of the year. We also reduced interest expense by $150,000 to a total of $1.9 million for the quarter $100,000 of the decrease relates to our lower total debt levels and $50,000 relates to lower average interest rates. Term SOFR, which drives our rate for the majority of our debt was flat, but we achieved a 25 basis point reduction in our spread above SOFR for our bank debt near the end of the first quarter. This reduction benefited Q2 and will benefit our rate going forward. And we had the opportunity to reduce the rate by another 25 basis points in Q3 and expect to see that benefit in the Q4 income statement. We recorded income tax expense of $2.1 million for the first quarter resulting in an effective tax rate of about 19%.

For the year-to-date, the effective tax rate is 19.3% and includes a projected annual ETR of 20% and $100,000 of a discrete benefit related to share-based compensation items. Net income for the quarter was $8.9 million or $0.90 per diluted share. This more than doubles Q1 diluted EPS and brings the year-to-date figure to $1.33. The current quarter diluted EPS is the highest since Q1 2007 excluding the fourth quarter of 2017 which benefited from the tax adjustment. EBITDA was $17.9 million. Adjusted EBITDA includes an add-back, for noncash share compensation and was $18.5 million, a 46% growth over Q1 and the highest level in company history. Our income adjusted for noncash items generated $16.2 million, during the quarter. We grew net working capital by $5 million as AR grew from the timing of our Q2 sales, and inventory grew along with increasing VIM in North production to support ramping VIM sales.

We spent $5.5 million on capital expenditures, bringing year-to-date CapEx to about $11 million. We expect full year 2024 capital expenditures to total approximately $18 million. Our debt paydown was about $3 million in Q2. We expect to pay down our revolver and decrease our net debt each quarter for the rest of the year. That concludes the financial update and I’ll hand the call back to Chris.

Chris Zimmer: Thanks, Steve. In summary, our sales and profitability reached new levels in the second quarter, with record sales of $82.8 million, record gross margin of 25.4%, record net income of $8.9 million or $0.90 per diluted share and record adjusted EBITDA of $18.5 million. The combination of our focus on aerospace and premium alloys, with targeted margin improvement projects has been transformational as we’ve created a structural change in the margins we can achieve. That change is sustainable going forward and we plan to build upon it. We continue to invest in our premium alloy capacity and efficiencies, while also reducing debt. We remain fully focused on managing working capital, generating positive cash flow to further fund capital investments and debt reduction.

For the balance of this year, we continue to see opportunities to grow our top line and expand our gross margin. As I said in today’s release, we remain highly optimistic about our growth momentum and strategy for 2025 and beyond. This concludes our formal remarks. Operator, we’re ready for questions.

Q&A Session

Operator: Thank you. At this time, we’ll conduct the question-and-answer. [Operator Instructions] Our first question comes from Phil Gibbs at KeyBanc.

Phil Gibbs: Hi, good morning.

Chris Zimmer: Hi. Good morning, Phil.

Phil Gibbs: Question was just on some of the capital spending initiatives that you have and what you mentioned incrementally, this morning. So currently you have, the VARs being commissioned at the current time and then you mentioned, more debottlenecking initiatives or growth and size of the potential end of them. That sounds like it’s more relegated to next year, but kind of take us through where you are on some of the bigger items this year, and then what you announced today and what the goals are?

Chris Zimmer: Yes. Our capital this year, capital spending is going to be in the $18 million neighborhood. You can expect half of that, a little more than half of that to go towards what we call sustainability. So this is the maintenance and the upkeep of legacy equipment. We’ve got about $4 million going towards modernization projects. So this is the ability for us to be able to implement technology throughout the plants, helping a new generation of workers in the plants, work more efficiently and safely and get back to some of the production levels that we had enjoyed when we had what I call the pre-COVID workforce, and all the tribal knowledge that they contained and these modernization efforts are really starting to take hold as we’ve been expanding our production levels each quarter.

And finally, the growth in ROI side of the CapEx spending is going to be in the neighborhood of $5 million to $6 million. These are going to be things like furnace capacity a number of the alloys that we’re producing that are more advanced require a little bit more time in the furnaces. So, we’re adding furnace capacity at the forge and downstream, putting investments into a number of areas that are either down money for investments next year like the VIM, or areas to be able to enhance our pull-through on the finishing side. I gave you a little bit of color. Hopefully that answers it Phil.

Phil Gibbs: What would you describe as your primary bottleneck right now in terms of capacity or capability? And then secondly, on the labor front, are there any thoughts that you need to add more targeted areas there? Or do you feel like you’ve got the right set of folks coming up the curve at the moment?

Chris Zimmer: Yes. So let me talk a little bit about what’s been pacing lead times. For our premium products, VIM primary melt has been the area that has really been pacing lead times. We did have a very strong quarter ramping melt production there. We’re on track to have another record production quarter at to VIM here in the third quarter, all in line with what we’ve got baked into the backlog. Aside from VIM melt production pacing lead times, finishing, particularly on small diameters has been another area that has also been pacing lead times, simply because of the nature of the labor intensity of the smaller diameter product. From a labor standpoint, we have seen better stability, but I’m not where we want it to be. We still have opportunities to continue to pull-through and retain workers at a higher level.

As we get them working safely and efficiently following instructions and working to the levels that we need them to work at, I think we’re really close to getting back to those pre-COVID production levels, which we’re just shy of right now. But I expect as we move through the second half of this year into 2025, we’ll return to those production levels. So, labor has improved. It’s stabilized. But I think we can still continue to get better fully staffing up and securing those reliable good workers that we need.

Phil Gibbs: And how should we be thinking about net working capital over the balance of the year? And then within that, have you — and I know the margins have been obviously outstanding but was there any misalignment still going on or is that still over? So, I guess two questions: one on the net working capital and one on whether or not that there’s any raw material misalignment?

Chris Zimmer: Yes. So you’ll see that inventories went up a little bit in the second quarter. The primary driver there is that we did get a little bit ahead of ourselves in melt by design late in the second quarter, knowing that we had some planned annual maintenance outages at our melt shops. So we will bring our inventories and our working capital levels back down to ending first quarter levels by the time we exit the third quarter here. So getting those inventories back under control, getting back realigned on that commitment to grow our top line while keeping our inventory levels flat to down. And remind me your second question there Phil.

Phil Gibbs: Was there any raw material misalignment in the second quarter? And what do you expect in the back half? Thanks.

Chris Zimmer: Yes, it was very minor. It was only an adverse about $500,000 to $600,000 that we see the misalignment impacting the second quarter. It got to the point where we didn’t specifically call it out. So just modestly negative, but we’re now seeing enough stability in surcharges and in the raw material flows that I don’t expect it to have any type of a misalignment here in the third quarter.

Phil Gibbs: Thank you.

Chris Zimmer: You’re welcome. Thank you, Phil.

Operator: Thank you. Our next question comes from Bob Sales at LMK Capital Management.

Bob Sales: Hi. Can you hear me?

Chris Zimmer: Yes. Hi. Good morning, Bob.

Bob Sales: Good morning. Nice quarter. A couple of questions. First of all, on the premium alloy mix how much — if you were to guess how much of that premium alloy goes into defense versus commercial aero?

Chris Zimmer: The majority. So the premium alloys lend themselves to structural components within defense applications both on fixed-wing fighter craft and on helicopters. The premium products also lend themselves to the engine part of the business. So obviously, you’ve got engines and fighter jets, but these premium products are also going into engines that are in the commercial aerospace side of the business. So rough cut, I’d say about two-thirds of those premium products are aligned with defense applications and about one-third of it ultimately into engines for commercial applications.

Bob Sales: Okay. Thank you. And then can you touch on the backlog a little bit? I think you mentioned — can you expand on what you mentioned about the fact that order entry you’re working with customers on order entry. I assume that meant that earlier in the year you were putting more orders into the system that you were constrained by and that’s given some — and you probably have some relief with throughput now, but I’m not sure I’m right. So can you expand on that a little bit?

Steve DiTommaso: Yes. The primary driver there as you look back particularly in 2023 when we had a high watermark for backlog at that time, we had premium alloy lead times that were out in the 70-week to 80-week range depending upon the size range of products. It makes it very difficult for our customers to plan on demand being that far out with the visibility that they have. So we’ve been working with customers assuring them an allocation so that they feel comfortable that they are going to have a spot in line with us but we’ve been walking back our lead times. And these days we’ve gone from call it mid-70s to right around 45-week to 50-week lead times on those premium alloys. And we’ve done that just by controlling order entry on a controlled basis periodically opening up the order book for customers to layer in new orders.

So that total level of demand on aggregate of what we expect in the quarters to come continues to increase. But we’ve just been walking in the lead times. So this has been very helpful to our customers. It’s given them the ability to layer in a higher assurance that the sizes and the grades that they’re ordering align with what they need. This has been a very good thing for customers. And it’s also helped to enhance us from a competitive standpoint. So as we continue to walk those lead times back in and ramp our production levels it’s going to put us in a better position to sustain our growth trajectory.

Bob Sales: And what level do you feel will be — for your premium what level do you feel like will be normalized lead times?

Chris Zimmer: Well that’s a good question because I think we’re still in an environment for the foreseeable future. And by that I mean years where we’ve got an environment where demand is going to outpace supply. And I’m speaking for the industry not just Universal Stainless. So the capacity is going to come as we ramp our efficiencies and we’ve got some modest increases that are going into the equipment at our VIM facility to be able to give us more capacity and throughput there. But I suspect that living in the call it 10-month to 14-month range industry-wide is probably going to be the new norm. A lot of that is going to depend upon the sustained growth and demand of these premium alloys and the ability for Universal and the industry for that matter to continue to ramp our throughput and production levels.

Bob Sales: Okay. And then lastly on backlog, so we don’t draw any erroneous conclusions. Do you expect backlog continues to trend down over the next several quarters, as you make improvements? Or do you expect that it will maintain the level that we’ve seen this quarter?

Chris Zimmer: Well, I think my bias would be that it would move sideways to slightly down. I think the one wildcard there is, while it’s clear that the aerospace and defense business continues to remain extremely strong, we continue to win new pockets of share, as we gain approvals but those markets outside of aerospace continue to be a bit muted. We think that some of it is tied to the election. The market is looking for some certainty moving forward. So we’re turning in record results right now and we’re not quite firing on all cylinders. Once that tool steel plate market or heavy industry market starts to pick back up, energy market, semiconductor that will help to bolster up our backlog and it’s going to help to fuel the top line as well too.

I’ve got a bit of a conservative approach. I’m not sure that we’ll see that economic benefit in those other markets for us, until the latter half of 2024 going into 2025. But if the markets wake up and they decide that they want to start surging on order entry we’re poised and ready to be able to meet that demand.

Bob Sales: Thank you. Congratulations on the performance.

Chris Zimmer: Thanks, Bob. Appreciate it.

Operator: Thank you. [Operator Instructions] Our next question comes from Phil Gibbs at KeyBanc.

Phil Gibbs: Thank you. My question was around the comments in the release on the sustainable cost improvement or efficiencies that you garnered as part of your gross profit margin outcome something certainly that appeared new to the discussion. So maybe talk a little bit about what that means and why you highlighted it this quarter? Thanks.

Chris Zimmer: Okay. Sure. Yeah. These — I’m going to have Steve talk a little bit about it. He’s worked closely with our industrial engineers technology and operations group quantifying these initiatives to reduce material costs ops costs improve yields. So Steve, do you want to touch base a little bit on these initiatives and why we’re just now calling it out?

Steve DiTommaso: Sure. So we implemented some specific projects in our — in 2023 as part of our 2024 plan to drive margin improvement. So some examples of those are actively reviewing heat charge makeups for our melt shops, and we trialed and successfully implemented lower cost methods of melting product without sacrificing quality. Another example would be yield improvement. So we carved out subsets of our product categories. We attacked our flat rolled plate business and some different components of our round bar business to drive yield improvement. So as I described those right melts and yield improvement they took some time and effort to implement. They work through our inventory and reach the P&L upon shipment. So we’re really starting to see the benefits of those projects pop in Q2, which is why we’re calling them out now.

They’re a significant part of that margin improvement. And we wanted to highlight them to drive home the message that they’re sustainable. These are things that we’ve implemented and won’t go away.

Phil Gibbs: Lastly for me, kind of on a different track, you’ve been — you’ve been adding capability to the operations recently and then also overtime when you made the big acquisition a decade plus ago to sort of get you where you are with North Jackson. So there’s certainly interest in building certain capabilities for the industry. And then there’s sort of a limited asset set of places that can do these things. Has that drawn more interest in the M&A, environment? Is there — is there — and do you think the M&A environment could get more, active? I think one-by-one-by-one we’ve seen obviously with the Titanium operations that used to be out there in the marketplace which drove over [indiscernible] things like that overtime, PCC things have kind of gotten gobbled up.

So there’s sort of a lack of — kind of a lack of assets out there seemingly in your wheelhouse. But are there any thoughts that there should be more consolidation in the market? Is that something that’s being talked about more broadly by the industry?

Chris Zimmer: Yeah. I think you’re spot on the idea that what we do is a unique spot in the Specialty Metals industry. There’s, not a lot of players out there doing what we do. We know about Acerinox acquiring Haynes. It looks like that deal is getting ready to go through final approvals and to happen. As a public company, we’re always susceptible to having those types of discussions. But I can tell you that our focus right now has been around executing on our strategy. We’ve got a big backlog, that we need to be able to eat into that I think is going to continue to drive better results. As we look around the industry and opportunities for us to be able to supplement our growth where we can find capacities we’re utilizing them asssets out there in the marketplace that had historically supported automotive demand for example being able to partner up with some people to help us on the finishing side.

And we do that in kind to wherever we’ve got some available capacities we’ll offer out those conversion services to other customers. But you’re right, the market is tight. VIM supply is tight demand is fantastic and it’s only going to get stronger. But this is an industry that needs to find a way to grow. It needs to find a way to support all these planes that we need to build. But in short our focus right now is just being able to execute realize the full potential of the assets that we have, a very organic structure there, but keeping our eyes open on ways that we can find partners to help us accelerate that growth.

Phil Gibbs: Thanks Chris and Steve to share it.

Operator: Thank you. Our next question comes from Bob sales at LMK Capital Management.

Bob Sales: Chris, I did have one more question for you.

Chris Zimmer: Yeah.

Bob Sales: You don’t consistently tell Denny Oates that this business is really easy to run, do you?

Chris Zimmer: Nos. No. No. I’ve been having fun in a new role. We’ve got a really good team here. So it’s made the successful transition a lot user because we got a really good team here.

Bob Sales: I’m sure Denny is listening so I couldn’t resist the question.

Operator: Thank you. I’m showing no further questions at this time. I will now like to turn the call over back to Chris Zimmer, for closing remarks.

Chris Zimmer: Thank you. Thank you everyone for joining us this morning. The first half of 2024 was one of substantial progress and momentum and we’re focused on continuing to achieve both of those during the rest of this year. I look forward to updating you all on the progress during our third quarter call. Thanks, and have a great day.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.