Heritage-Crystal Clean Inc (HCCI) 2015 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Heritage-Crystal Clear Incorporated first-quarter 2015 earnings conference call. Today's call is being recorded. At this time, all caller's microphones are muted, and you'll have an opportunity at the end of the presentation to ask questions. Instructions will be provided at that time for you to queue up for your question. We ask that all callers limit themselves to one or two questions.

Some of the comments we will make today are forward-looking. Generally, the words aim, anticipate, believe, could, estimate, expect, intend, may, plan, project, should, will be, will continue, will likely result, would, and similar expressions identify forward-looking statements.

These statements involve a number of risk and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risk and uncertainties include a variety of factors, some of which are beyond our control. These forward-looking statements speak as of today. You should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

Please refer to our SEC filings including our annual report on Form 10-K, as well as our earnings release posted on our website for a more detailed description of the risk factors that may effect our results. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section on our website.

Also, please note that certain financial measures we may use on this call such as earnings before interest, taxes, depreciation, and amortization or EBITDA are non-GAAP measures. Please see our website for reconciliation on these non-GAAP financial measures to GAAP.

For more information about our Company, please visit our website at www.crystal-clean.com. With us today from the Company, are the Founder, President, and Chief Executive Officer, Mr. Joseph Chalhoub; the Operating Officer, Mr. Greg Ray; and the Chief Financial Officer, Mr. Mark DeVita. At this time, I will turn the call over to Joe Chalhoub. Please go ahead, sir.

Thank you. And welcome to our conference call. Last night we issued our first-quarter 2015 press release, and posted on the Investor Relations page of our website for your review. This morning, we will discuss the financial statement, and our operations in the first quarter. And we will respond to questions you may have relating to our business.

Our first-quarter revenues were $84 million, compared to $66 million in the first quarter of 2014, an increase of 27.4% mostly as a result of our FCCEnvironmental, or FCCE, acquisition.

Revenues increased significantly in all of our traditional lines of business. During the first quarter of 2015, we worked diligently to integrate the legacy FCCEnvironmental business into Heritage-Crystal Clean. We are pleased to announce that the integration is substantially complete, and that we have already started to realize some of the benefits of this acquisition. We expect that we will generate annualized synergies at or above our original target of $20 million starting in the second quarter of 2015.

In our environmental services segment, the revenue increased 35.9%, compared to the first quarter of 2014. Primarily from additional sales to legacy FCCE customers in all of our environmental services lines of business.

Revenues in our vacuum services line of business doubled from the first quarter of 2014 to the first quarter of 2015, primarily due to the volume added from the FCCE acquisition.

In addition, we realized revenues from our new field services line of business. We estimate the revenue increase from the legacy HCC customers during the first quarter of 2015 to be 13.7%.

Revenues also grew in our oil business segment due in large part to our sales of recycled fuel oil, or RFO. In addition, we increased through-put at the refinery compared to the first quarter of 2014 and produced this at an annualized rate of approximately 100% of our capacity.

However, revenues continued to be pressured by lower pricing of our oil product. In response to these market conditions, we continued to reduce the price we paid to generators for their used oil. We were able to decrease the weighted average price paid to generators for their used oil from the fourth quarter of fiscal 2014 to the first quarter of fiscal 2015 by over $0.45 per gallon. The price we paid for used oil at the end of the first quarter was [4.7 cents] per gallon lower than the price we paid at the end of the first quarter of 2014.

Based on our oil route consolidation efforts, we substantially increased the efficiency of our oil collection routes, and as a result decreased our collection costs on a per-gallon basis as of the end of the first quarter.

We are pleased with these and other efforts to reduce costs. And we were able to reduce the loss before corporate SG&A in this segment compared to the first quarter of 2014 despite working within the much lower pricing environment.

Our ability to achieve these cost reductions is a testament of the quality of our service, and to the good customer relationships that our employees have developed with tens of thousands of individual accounts.

While we are pleased with our results in the first quarter, given the inventory write-down and integration costs incurred, we are even more optimistic about our opportunities for the remainder of 2015.

In addition, we continue to see great potential in the environmental services businesses we acquired from FCCE. During the first quarter, our environmental services segment generated approximately two-thirds of the Company total revenue, while the oil business segment generated approximately one-third of the total revenue. With the recent increase in crude prices, we're seeing increased RFO, and re-refinery byproduct pricing. And we see the potential for future increases in base oil prices.

Finally, we are exploring (inaudible) other savings opportunities beyond acquisition synergies, which could generate measurable benefits during 2015.

As you can tell, we're very excited about the remainder of 2015. Our Chief Financial Officer, Mr. Mark DeVita will now further discuss the financial results. And then we will open the call for your questions.

Thanks, Joe. I appreciate the opportunity to discuss HCCI's first-quarter 2015 results with our investors today.

In the environmental services segment, sales grew $14 million in the first quarter compared to the first quarter of 2014. Of the 72 branches that were in operation throughout both the first quarter of 2015 and 2014, the growth in same-branch sales was 23.9%. If you exclude revenues generated from legacy FCCE customers, the growth in same-branch sales was approximately 12% during the quarter.

Our average sales per working day in the environmental services segment increased to approximately $880,000 compared to $840,000 in the fourth quarter of 2014.

In the oil business segment, sales for the first quarter were up $4.1 million from the first quarter of 2014, mostly as a result of RFO sales.

We are pleased that our margin in environmental services segment improved compared to the first quarter of 2014. Even considering the impact of adding FCCE volume, which was traditionally lower margin than our legacy business, our profit before corporate SG&A in this segment increased to 23.5% during the first quarter of 2015, compared to 22.6% in the first quarter of 2014. This result was achieved despite the requirement to write down our solvent inventory by $1.7 million due to the continued decline in solvent prices, which is related to the decline in crude oil price.

If you exclude the impact of the inventory write-down, our profit before corporate SG&A in the environmental services segment would have been 26.7% for the first quarter. In the first quarter, our oil business experienced a loss before corporate SG&A of $1.7 million, or negative-5.5% compared to a loss before corporate SG&A of $2.3 million, or negative-8.6% in the first quarter of 2014. On a percentage basis, this represents an improvement in operating margin of 3.1%.

The operating margin in our oil business was negatively impacted by the continued low prices for our oil products. As Joe mentioned earlier, low product pricing has forced us to continue to drive the price we pay for used oil lower in the first quarter. Lower used oil cost was one of the main reasons we were forced to write down our oil inventory by approximately $0.9 million during the quarter.

Corporate SG&A was 13.2% of revenues, down from 13.4% in the year-ago quarter. We believe that as we finish up the integration of FCCE and realize increased synergies, we will continue to see a decline in SG&A as a percentage of revenues even after considering the steep decline in revenue from lower oil product prices compared to a year earlier.

During the first quarter, we estimate that we realized approximately $2.9 million in the synergies and incurred $1.4 million in costs to achieve synergies including severance obligations for FCCE resulting in net synergies of $1.5 million.

At the end of the quarter, we had $79.1 million of total debt and $20.3 million of cash on hand. We incurred $554,000 of interest expense for the first quarter of 2015, compared to interest expense of $53,000 in the year-ago quarter.

For the first quarter, we experienced a net loss of $0.9 million compared to a net loss of $1.6 million in the first quarter of 2014. Our basic and fully diluted loss per share for the quarter was $0.04, compared to $0.09 in the year-ago quarter.

Thank you for your continuing interest in Heritage-Crystal Clean. At this time, I will turn control of the call over to our operator, and she will advise you of the procedure to submit your questions.

Thank you. (Operator instructions)

David Mandell, William Blair.

Good morning, guys. Do you care to update the prior guidance ranges you provided?

We still feel that those ranges are appropriate at this time, so there is no change. But I will affirm that right now.

All right, thank you. And then on the environmental services side, how's pricing going there? Are you guys still remaining focused on that even with the integration?

Yes, we're very happy. We're experiencing at least the traditional success in some of the businesses like parts cleaning that we typically have had. You know, that's been our leader as far as price increase realization over the years. And that continues to be the same case.

And we're taking that methodology to some of the other businesses that in recent years we've had more success with -- vacuum service business and drum business as well. It's muted somewhat on an overall basis by the fact that we have a lower starting point and a different customer set that we're integrating with FCCE. But overall, we like the early success we've seen. I don't know if Joe or Greg want to add.

Yes, in addition to what we've actually done, this -- as we -- some of this as we were integrating the two companies on the pricing aspect. But there's plenty of opportunity to continue to improve the pricing (inaudible) we don't want to lose customers in the process of adjusting the service fees. And -- but we've done some of it, and we're happy with the result. Greg?

Yes, I agree with that. I think that part of David's question was, were we so busy with the integration that we lost sight of pricing. And that's not the way we think. We are always thinking about how to manage the pricing of the business to get the margin improvement that we're used to on an annual basis. And I think we're keeping that in the forefront of our thinking. From an economic perspective, that's one of the most important things we do. And so we make sure that that doesn't ever fall off the plate.

And then last question, regarding the re-refinery expansion, any update on timing there?

Well, we're still looking at towards the end of the year to get the full 75 million gallon capacity. We are doing some work prior to the end of the year. This quarter in particular we're adding the new [hydrotreater] reactor. And so in the third quarter we'll also do some work and have it wrapped up towards the end of the year.

Thank you for taking my question.

Sean Hannan, Needham & Company.

Yes, thank you. Good morning. Can you hear me?

We can hear you, Sean.

Good morning. First, just to comment, great job on the integration efforts. It's substantially more cost taken out early on than I had anticipated. And just want to make sure if I do some math correctly, if I were to back out the write-downs here, it looks like I'd come out with about a non-GAAP earnings number of about $0.06. Is that fair?

Yes, I had emailed you back. It was pretty short before this call. But yes, you're correct with that math.

Okay. And then in terms of looking at next quarter. So based on the expectation that we're going to realize the $20 million in synergies, kind of annually starting next quarter. So we're going to get about another $2 million incremental. That'll be associated, say with maybe nominal charges within the quarter. But it's $2 million incremental savings that we'll see now in 2Q, correct?

Yes, we might not get -- we'll definitely be at the run rate in the quarter. We might not have it all day one.

Okay.

But that's good.

Okay, that's fair. What were the RFO sales during the quarter?

What were the RFO sales? You know what, I'll get that to you here before we hang up, hold on. Or if you have another call --

Okay, yes. Just a couple of housekeeping scenarios. So RFO sales, the specific gallons sold -- I'm not sure of I had heard that. And then the utilization. So just a couple of quick stats there that I'm looking to (multiple speakers) down.

Yes, we got it real quick. It was about a little more than $6 million as far as revenue in Q1 for RFO.

Okay. Okay, and then in terms of re-refined gallons sold and how the facility operated from a utilization standpoint?

Yes, it was 100% utilization as far as the volume -- you know, production was over 9 million gallons, about 9.5 million -- or not production, sales were. Production was a little less than that, but they're usually close to in balance.

Okay, great. And then topically on the environmental services organic growth that you had -- 12%, pretty good number there. This is a recurring question. I'm sure it probably still will be for a period of time. What are you seeing within that space competitively. Obviously there will be, in some manner, a stepped up effort that we'd see from the safety clean business over there at Clean Harbors as they try to recap some share.

So I do realize that you're not necessarily head to head in all localized markets. But if you could provide any update around how you're viewing the competitive environment, the ability to retain share, and grow on a more sustainable basis. Because this 12% number was a pretty good number, coming back here to double digits. Thanks.

Yes, I'm going to take this one. We really haven't seen much in the field here in the last few quarters coming from the different other competitors. And different than what we've had. I mean, we compete fiercely in the marketplace. We're proud of our team. We've -- year after year, under different conditions, we were have -- have been able to grow the business. And we don't really see that changing.

And [we'll be] dealing with a total of 100,000 customers. So [no other organization is] like ours. And we don't feel vulnerable at all by any effort put in the marketplace. We do not focus on the large Fortune 500 in that area. Because historically we found the margin's not as attractive. And we felt that there were a lot more competitive pressure for these accounts. So we focused on the smaller customers. And it's pretty hard to change the needle or the trend when you're dealing with such a large number of customers.

Okay, that's helpful. And then last question here. When you think about the environmental services business, and the revenue synergies that you would get through the FCCE transaction, can you elaborate a little bit more, perhaps, on the metrics that you're using as you evaluate the progress on that front, and how you expect that to materialize? And perhaps even what may be surprising you on that front as you gain traction there? Thanks.

Sure, Sean. This is Greg speaking. And as part of our integrated sales and service approach, every one of our people and all of our branches have always had an interest in cross-selling as a way to further enhance the service delivery to customers, and to grow our revenue base. But it's always been somewhat informal.

And as a result of the work we've done around the FCCE integration, we've begun to put in place some more systematic approaches. We are measuring cross-selling penetration, and we're in the early stages of figuring out how to incent our guys to do a better job of cross-selling. Certainly, the opportunity is very ripe for us if we can figure out good ways to expand or enhance cross selling. We know that our typical customer does not use very many of the services that we have available. And that we can substantially increase that number in the installed customer base.

And in future quarters, if we're able to do what we're hoping, we may start reporting on some of the specific statistics and sharing a little more visibility on that with you. But clearly, with FCCE we picked up a company which was pretty heavily focused on the used oil business, and had not cross-penetrated particularly well in the other environmental services that we offer. And so we see that as a great opportunity for us to enhance our penetration and grow the business.

And you saw with the numbers Mark reported earlier that we get some incremental revenue to our environmental service from FCCE. But that's sort of the revenue, for the most, they were already doing. Not new stuff that we're beginning to sell to those accounts.

So your question's a little bit early in terms of our giving you any quantification of it. But we're working on that. And we think that that'll be helpful to keep our people focused on further delivering on that great opportunity with more than 100,000 accounts, many, many of which could use several more services of the type that Heritage-Crystal Clean offers than they currently do.

Okay. Very good. Thanks so much, folks.

(Operator instructions)

Michael Hoffman, Stifel.

Thank you, Joe, Greg, and Mark. Some questions around asset utilization. Joe, you've talked about in the past, sort of an ideal target as a starting place for truck utilization on the collection side's sort of half a million gallons. Where are you in penetrating that number today?

We're -- we really like our progress. This is Mark, by the way, Michael. One of our main goals, or one of the certainly rationales for the transaction was route consolidation. We could do things better. We had the overlap with FCCE that was pretty much complete with our route. So we've done a lot of that work in the first quarter. Although, it was through the quarter, the fist quarter numbers really aren't indicative. Although, they're, I guess I'd say, they're up almost two-thirds versus where they were on a stand-alone basis last year on gallons per truck for Q1.

So that's obviously great news for us. But we think we can go higher. We're -- if you look at where we're at, we're in that general ballpark now. And I think we think longer term that we can continue in a much more of an incremental way as opposed to hundreds of thousands of gallons at a time. But a more incremental way to get even beyond those numbers or that range you mentioned.

Okay, so just let me just make sure I understood this. You're at or approaching a half a million gallons per truck through route rationalization and the overlay of the collected gallons from FCCE. That's it?

Yes, yes.

Okay, and the next leg of that, I would assume comes from part of this perfect storm of crude coming down. Lots of independent collectors may not make it and you should be able to pick up incremental volume over time to drive that utilization higher on essentially a flat footprint of trucks. Is that the right way to think about it?

Well, Michael, it's a good question. It's a question that we have ourselves -- we've been tracking what's happening in the marketplace. And unfortunately we haven't seen the smaller guys weaken to the point of putting up the white flag.

And so will this happen throughout this year, I'm not so sure. The difficult part here was the fourth quarter and the first quarter. And the crude is picking up momentum from the low point in the first quarter. And so RFO is going up. And if you are buying used oil from third parties to feed your plant, and that price has gone up. And so they'll be less pressure on these independents today. But it's hard to tell. We haven't seen a lot of noises here regarding people pulling out and not servicing the customers.

Okay. The -- go ahead, sorry.

The collection cycle, the calendar throughout the year has some fairly significant seasonality to it. So if during the busier kind of mid year months you're running at a half million gallon rate, that doesn't translate to averaging a half million gallons a year for the whole calendar year. So that's one thing to keep in mind.

The other thing is when we think about how we're loading the trucks, we really in the first quarter, as Mark said, rationalized our fleet. We were trying very hard to deliver the synergies and make sense of the acquisition. And so we made lots of cuts to get the fleet right size. In the context of doing that, we also were adjusting for the fact that we had lost some volume -- some seasonal losses, but also some competitive losses to get the fleet down to the right size.

And a lot of competitive losses probably are due to the fact that we were out very early and aggressively with our reduction of PFO well ahead of the rest of the market. And so people were chipping away and taking a little bit of share from us. It's our hope that we get some of that business back over time. We're not sort of changing our pricing philosophy. But we think that some of the people who were very aggressive about paying significantly more for used oil than we were during this decline are trying to behave in a more disciplined way. And maybe we get back some of our historic customers, which will let us get the route of trucks to a little bit higher level of performance or capacity. Does that make sense?

Completely. Yes, so following on to that, I guess there's two parts to this. I have this impression that the collector, or the generator could store oil for a couple months at a time. And now you've got rise in crude. So are you finding yourself in this interesting conundrum where there's some pushback coming? Or have you been able to switch the mindset from, hey this is a regulated industrial waste, and we're going to treat it like a regulated industrial waste?

Yes, Michael, this is what we're hoping to accomplish. Unfortunately, it's not what we're seeing. It would have been a lot easier if crude had stayed down to $30 -- or went down to $30 a barrel, and most of the people would have had to pay for a substantial fee. Crude moved up and over a period of time, we would -- we're planning to improve our spread. But it's very difficult to do it in a quarter or two.

And I will tell you right now as we speak, and crude went up by, from the low point -- but yesterday it dropped again -- but it went up by close to $15 a barrel. And we're seeing noises. Some of them are coming from customers. And some of them are coming from competitive pressure in the field. And we're managing this thing very closely. And we got systems in place and (inaudible), but at senior management level of our sales and branch organization. And there's a lot of noises. So we'll have to see how things evolve in the next -- this quarter in particular.

And Mike, we may have talked about it before, but I'm sure that you can recognize that there's a sort of psychological discontinuity in pricing. That the difference in the customer's mind between getting paid $0.30 or getting paid $0.20 is very different from what the customer thinks of as the difference between him getting paid a nickel and getting charged a nickel. And it's the same dollar difference, but it's very different emotionally or psychologically.

And so over the last few months, we have taken many customers to a charge mode. But we find that those customers are getting proposals from large competitors who are saying, we'll still pay you a little bit. And so it's pretty hard to sustain that. And so I would say that we probably have run up -- Joe talked about crude prices being a part of that factor. But we probably by ourselves, won't be able to get the mass of the market pushed over that line to a charge.

Okay, fair enough on that. I didn't understand clearly what the comment was made in the opening remarks about where you were at the end of the quarter on PFO. Are you below a dime?

Yes, I'd say we're below the double digits.

Okay.

Well, we're definitely below a dime. We've really, Michael -- we've kept -- we haven't really shared our numbers in the past. We've given you changes, I guess. But we're clearly below a dime.

We read all the research reports on our major competitors. And our price is -- we're paying less for oil than any of the reported prices we've seen from our competitors. (Multiple speakers)

All right. Well, the big one says they're at $0.05 to $0.07. So you're telling me you're below $0.05 to $0.07? (Laughter) Hey, I got to try.

(Multiple speakers) comment stands on its own, I guess.

All right. Is there -- are all of the inventory adjustments done?

Well, you tell me where crude's going to go. I would say yes from a practical standpoint, I would think that's highly likely. On oil solvent, I think so as well. (Multiple speakers) much bigger lag or a longer lag on solvent as you can tell by the magnitude of the impact in Q1 versus impact in some of our other -- in the oil business segment. But I would be somewhat surprised if we had any measurable write-down in Q2.

And we like -- we, quite frankly, we like the reduction in the price of solvent. It has hurt us in the first quarter. But we aren't in the (inaudible) business, we are a fee-driven organization.

It's not a spread -- (multiple speakers)

Not a spread (inaudible). And so we will benefit if that price stays where it is. We're going to benefit quite a bit the balance of the year.

Mike, your question literally about are all the inventory adjustments done. If oil price doesn't go back down significantly, then we wouldn't see more inventory charges. At kind of the level it's been at recently, we do get the accounting effect that's the opposite of that. It's not an inventory write-up, but it's a benefit for holding lower value inventory and then getting to sell it over time at better prices. And so that's a kind of inventory effect on the positive side rather than the negative side. So --

Yes, this is as much about trying to understand any short-term headwinds left as you're trying to model. I get the margin benefit of the alternative. And to that end on the environmental services, is the 84 branch number -- that's the integrated, we reduced all the overlapping, and 84's sort of the starting number? Or does it fine tune down from there as we're sort of modeling in branch revenue and average revenues through our model?

I would leave it at 84 to model. We still have some sites that we don't designate as a full-fledged branch where we have satellite type operations or just -- maybe just oil collection, this and that. Which we will save over the longer term. Some of those that aren't in the 84 number will probably go away. We'll have some minor incremental benefit over the rest of the year potentially and into 2016 from that as far as less facility or operating cost. But all the measurable branch -- established branches, so to speak, are pretty much done. So 84 would be the number.

Okay. And then in the past, the legacy company, when you found yourself in the high-20%s margins, you tend to use part of that margin to reinvest in growth. And you in effect walk it back towards 25%, that growth leverages back up towards the 28%, and that was sort of the cycle. Are those the sort of same ranges to think about? Or does the range maybe move up because there are things coming from FCCE that you didn't have at Heritage, and visa versa? And once you figure out that cross-selling it lifts the overall margin higher?

Well, Michael, this is our current thinking. So first of all, it's in our DNA to keep growing. So we're always looking at ways to keep growing the business. And yes, in the past, we would -- as we get the margin up, we would look at putting more towards expanding either geographically or our lines of businesses -- more lines of business in certain branch that didn't have that coverage.

And we are currently in a mode of digesting, cost cutting, and improving our margins, and our EBITDA. And this is our plan this year. Obviously, once we see what we feel we can deliver delivered, we will start thinking about what we need to do to ensure that we continue to keep our 10% to 12% growth on our ES business.

Okay, fair enough on that. And then on oil, given the prudent choice to wait on the expansion and then work through the integration, do you think we'll see in the quarter cycles as we work through the year, what I would call approaching a normalized margin for oil?

You ran the plant really well in the first quarter. You seem to have hit a performance platform that says, okay some of the things that have been dogging you a little bit, you got through and had a really very consistent quarter. So are we looking at a pretty healthy margin lift here as we get that sort of recurring pattern?

Well, first quarter is usually -- as you know, Michael, first quarter is usually poor for our industry, especially if you integrate all of your costs into one line of business. I mean, for us oil collection is part of the oil business. And in the first quarter, the winter quarter, typically the collection is down. So you got your fleet and branches, et cetera -- the collection is down, so you have a higher cost to collect the oil. And typically, in the winter there's a hiccup in the plant. Doing maintenance during winter months are costly, and effect the production.

But to answer your question about what the margin should definitely improve, and we had a [loss] in the first quarter. But how normalized? I mean, our objective is to keep improving that line of business. And maybe we're repeating ourselves, but we have three angles to which we want to improve. The efficiency of our routes, and we're happy with what has been accomplished with the FCCE acquisition that helps us there. We want to maximize the plant through-put and we've done that, and the expansion would put more through [the] plant. And the third one, which is the most difficult one, is to improve the spread between the value of the product and what we have -- what we pay or charge the generators.

And that's -- unfortunately, it's market driven as well. We think we're -- and I think we've demonstrated that. But we can stay ahead of the industry. But we can't go too far off and lose customer base. And we've done a little bit of that intentionally when the price of crude collapsed, because we just decided to go aggressively with the price reduction. And now we're looking at holding our base, and still wanting to maximize that spread. But it's definitely market driven.

Yes, and Michael, when I -- I don't have the guts of your model in front of me -- but based on where I see what you've put forth, I really think the ramp that you must have built in there in oil is pretty reasonable. So I would expect us to, or we would expect to be not changing that based on the first quarter. But we think you're in the ballpark on what you've projected.

Okay, well that helps. And then lastly, in your guidance you talked about $5 million to $6 million of cost for the integration of FCCE. You say you've done $1.4 million. So how do I think of where that $4 million to $5 million left falls through the rest of the year? Is it heavy in Q2 and then drivels, off? Spread out? How do I think about that?

You might have missed some clarification in the last quarter's call. We had said we shifted some of that to Q4, so we did some of that earlier.

Q4 of 2014.

Yes. So we're not expecting that this year. And we also, in addition to shifting some of that to 2014, we're not expecting to have quite as much. So that number you just said is definitely high. Yes, we would not expect to have that much left to do.

So to stay in the [42] to [53] adjusted means the [35] to [45's] better?

Yes, the adjust last quarter, again to clarify, we had said instead of the $5.5 million, it was more like $3 million. So we took $2.5 million -- or it's $2.5 million less in this quarter. And you're not going to get all that. All that wasn't spent in Q4. We'll spend a little less than that in total. So -- the number was $3 million. So you probably have at least $2 million less than you were thinking.

Okay. And most of that'll be in 2Q?

Whatever remainder would be -- a majority of it. We could have -- when we go through some site stuff, lease closure costs or thing like that. But it should be pretty minor, to be honest.

Okay. All right, thanks for taking my questions.

(Operator instructions)

Thank you for your time and interest. We are grateful for your support. We invite you to join us for our next conference call.