Heritage-Crystal Clean Inc (HCCI) 2023 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Heritage-Crystal Clean, Inc. First Quarter 2023 Earnings Conference Call. Today's call is being recorded. (Operator Instructions) With us today from the company are the President and Chief Executive Officer, Mr. Brian Recatto; and the Executive Vice President and Chief Financial Officer, Mr. Mark DeVita.

At this time, I would like to turn the call over to Mark DeVita. Please go ahead, sir.

Thank you, JL, and good morning, everyone. Some of the comments we will make today are forward-looking. These forward-looking statements speak as of today, and 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 affect our results. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website.

Also, please note that certain financial measures we may use on this call are non-GAAP measures. Please see our website for reconciliations of these non-GAAP financial measures to GAAP. We want to remind everyone that we have begun reporting our results in 3 segments beginning in the first quarter of 2023. Our oil business segment will continue to reflect the same activities reflected in the Oil Business segment in the past.

However, we have begun to report the results from the former Patriot Environmental business, the HCC legacy field services business and the operations of our non-hazardous waste processing facilities and our new Industrial and Field Services segment. The remainder of the activity historically reported in the Environmental Services segment will continue to be reported in the new Environmental Services segment.

In addition to the reporting segment change I just discussed, beginning with our 2023 fiscal year, we are reporting our results on a calendar quarter and calendar year basis. For more information about our company, please visit our website.

Now I would like to turn the call over to Brian Recatto to start.

Thank you, Mark. Good morning, everyone, and thank you for joining us today. On behalf of the entire Crystal-Clean team, we were very pleased to report our first quarter earnings yesterday, along with our financial reporting changes Mark mentioned earlier. On a total company basis, we performed well during the quarter, setting records for revenue, net income, earnings per share and EBITDA when compared to the prior year quarter. Total first quarter revenue was a 3-month quarter record at $193.5 million, which helped produce EBITDA of $36.2 million, which was up 50.4% compared to the first quarter of 2022.

Now I would like to discuss the results in our reporting segments. Let's start with the Environmental Services segment first. In the Environmental Services segment, revenue for the first quarter of 2023 was $94.8 million compared to $73.5 million for the same quarter of 2022. This represents a record high for a 3-month quarter and an increase of $21.2 million or 28.9% from the year-ago quarter. The increase in revenue was mainly due to increased demand and higher prices for our services compared to the prior year quarter.

We experienced revenue increases across all service lines in this segment when compared to the first quarter of 2022. Environmental Services profit before corporate selling, general and administrative expenses was $22.7 million or 24% of revenue compared to $13.1 million or 17.7% of revenue in the year-ago quarter. The increase in operating margin percentage was mainly driven by the price increase we initiated in December of 2022.

Now let's discuss the Industrial and Field Services segment. Industrial and Field Services revenue was $45.8 million for the first quarter of 2023 compared to $11.1 million for the first quarter of fiscal 2022. The $34.7 million increase in revenue was mainly driven by revenue from our acquisition of Patriot Environmental Services during the second half of 2022, but to a lesser extent, by higher demand that increased prices in our legacy field services business.

Industrial and Field Services profit before corporate SG&A expense increased $6.4 million or 583.6% in the first quarter of 2023 compared to the first quarter of fiscal 2022. Operating margin for the first quarter of 2023 was 16.3% compared to the recast margin of 9.8% in the first quarter of 2022. The increase in operating margin was mainly driven by increased revenues and better contribution margin from the Patriot Environmental acquisition made during the second half of 2022. From an integration standpoint, the Patriot acquisition has performed better than expected and cost reduction synergies are on plan.

Let's now move on to the Oil Business segment. Before we discuss the financial performance, I want to highlight our re-refinery has worked 1.2 million man hours in almost 7 years without a recordable injury. I want to thank our team members for this tremendous accomplishment. During the first quarter of fiscal 2023, oil business revenue was $53 million, a decrease of $1.8 million or 3.2% compared to $54.7 million in the first quarter of fiscal 2022. The decrease in revenue was mainly due to a decrease in base oil sales volume compared to the prior year quarter, partially offset by an increase in base oil sales price.

Oil Business segment operating margin decreased to 26.5% compared to 33.8% in the first quarter of fiscal 2022. A lower operating margin compared to the first quarter of 2022 was mainly due to a decrease in revenue from lower base oil sales volume, along with increased labor and transportation expenses. Increased labor costs as a percentage of revenue was due to our decision to intentionally slow the run rate at the re-refinery as a result of softer-than-expected base oil demand. Despite the slower run rate, our re-refinery team continued to execute well during the first quarter. We produced 12.1 million gallons of base oil during the first quarter, which was 1.8% higher than the year-ago quarter.

Now I would like to look forward and discuss our near-term future outlook. In our Environmental Services segment, we expect revenue growth in the mid-teens during the second quarter as macroeconomic indicators continue to show signs of a softening economy. From an operating margin standpoint, while certain operating costs have moderated, we have been facing and expect to continue to face inflationary pressure in some areas of our business, such as third-party hazardous waste disposal.

We will continue to monitor these cost pressures and if necessary, consider additional pricing actions. We expect second quarter operating margin in the Environmental Services segment to be relatively flat to the first quarter of 2023. From an Industrial and Field Services segment perspective, we continue to see strong demand and growth. On a year-over-year basis, we expect our revenue increase will be significant.

On a sequential basis, we expect at least single-digit and possibly higher revenue growth compared to the first quarter of 2023. From an operating margin percentage standpoint, we expect to be in the mid-teens range. Longer term, we are adding significant drum processing capabilities to our Industrial and Field Services segment, which will begin to lower our reliance on third-party suppliers while increasing margin contribution.

For the Oil Business segment, our base oil pricing has been down sequentially for the past 2 quarters, and we expect it to continue to move lower during the second quarter. This price decline has been driven by unseasonably soft demand as there has been no sign of the increase in demand we typically experience at the beginning of the second quarter. Due to the soft base oil market and the fact that we built base oil inventory during the first quarter, we plan to take our once-per-year extended shutdown at the re-refinery during the second quarter.

Moving the timing of our extended shutdown in the second quarter will result in more downtime during the quarter and should put downward pressure on our operating margin. From a used motor oil standpoint, we will work to offset the impact of declining base oil pricing by lowering the price we pay for collected oil. As a result, we expect our operating margin percentage for our Oil Business segment to be in the mid- to high teens for the second quarter and then moving above 20% for the balance of the year.

With that, Mark will take us through our first quarter financial results.

Thanks, Brian. As Brian mentioned earlier, during the first quarter of 2023, we set a revenue record for a 3-month quarter. The increase in revenue was mainly driven by revenue from the Patriot Environmental acquisition made during the second half of 2022 and as well as higher demand and increased prices for our products and services in our Environmental Services and Industrial and Field Services segments.

Net income was $16.6 million or $0.70 per diluted share for the first quarter of 2023. This compares to net income of $12.9 million or $0.55 per diluted share in the year-earlier quarter, which represents a basic earnings per share increased to 27.3% compared to the first quarter of 2022. If you adjust out the 4 additional working days, we estimate basic earnings per share would have increased by 19.8%. Let's move on to the details of our Environmental Services segment results.

The revenue increase Brian spoke of during the first quarter was mainly due to the continued increase in both the demand for our services and higher pricing for [shed] services compared to the prior year quarter. In the parts cleaning, wastewater vacuum and antifreeze businesses, our revenue growth was roughly split evenly between price and volume. In the containerized waste business, while we did deliver higher prices, increased volume was the main driver of our revenue growth during the first quarter compared to the first quarter of 2022.

The Environmental Services profit before corporate selling, general and administrative expenses was $22.7 million or 24% of revenue compared to $13.1 million or 17.7% of revenue in the year-ago quarter. The increase in operating margin was mainly driven by increased leverage on our labor and benefits costs as a result of rising revenue. The disposal cost as a percentage of revenue was also lower than the year-ago quarter when disposal costs were increasing rapidly. Now let's discuss Industrial and Field Services. Brian already discussed the significant increase in segment revenues during the quarter. So let's discuss our operating margin in this segment.

Industrial and Field Services profit before corporate SG&A expense as a percentage of revenue increased to 16.3% compared to the recast percentage of 9.8% in the year-ago quarter. Our first quarter operating margin is reflective of a permanent change we made during the quarter to reclassify certain labor and benefit costs for field-based employees of the former Patriot Environmental business from corporate SG&A expense to operating expense.

For the first quarter, these expenses amounted to approximately $1.5 million. If we had not made this change, our operating margin percentage for the first quarter in this segment would have been 19.5%. The increase in operating margin was mainly driven by increased revenues in comparison with the increase in operating costs as a result of the Patriot Environmental acquisition made during the second half of 2022.

Before I move on to the Oil Business segment, I want to point out that the operating margin percentage of the combined Environmental Services and Industrial and Field Services segments would have been 22.5% or 130 basis points higher than the operating margin percentage when the 2 segments were still combined in Q4 2022 if we would not have moved the labor and benefit costs described earlier from corporate SG&A expense to operating expense. Let's now discuss the Oil Business segment.

Since Brian already discussed our overall revenue and operating margin performance and the drivers for it, I will jump into the detail. During the first quarter, we increased the volume of used oil we collected by 12% compared to the year-ago quarter after adjusting for 4 additional working days during the first quarter of 2023 compared to the first quarter of fiscal 2022.

Our net pay for oil during the first quarter of 2023 increased $0.13 per gallon compared to the first quarter of 2022. However, sequentially, our pay-for-oil decreased by $0.04 per gallon from the fourth quarter of fiscal 2022 to the first quarter of 2023. This marks the first time in the last 10 quarters that our net pay for oil decreased. The cost of third-party used oil feedstock increased by $0.05 per gallon from the fourth quarter of 2022 to the first quarter of 2023.

On the positive side, we decreased our volume of third-party feedstock purchases by 52% compared to the first quarter of fiscal 2022 after adjusting for the 4 extra working days in the first quarter of 2023 compared to the first quarter of fiscal 2022. From an operations perspective, we ran our re-refinery at 97.1% of nameplate base oil capacity during the first quarter. The below 100% run rate was driven by our decision to run the facility at a slower rate due to the soft base oil demand Brian mentioned earlier.

For the quarter, we produced 12.1 million gallons of base oil compared to 11.9 million gallons during the first quarter of 2022. After adjusting for the longer first quarter during 2023, base oil production was approximately 5% lower than the first quarter of 2022. From a sales perspective, we sold 10.2 million gallons of base oil during the first quarter of 2023. This represents a decrease of 19% compared to the year-ago quarter after adjusting for the longer first quarter of 2023 compared to the first quarter of fiscal 2022. Our total company operating costs as a percentage of revenue decreased to 72.4% during the first quarter of 2023 compared to 73% in the first quarter of 2022. The decrease is mainly due to lower oil inventory cost of goods sold and lower transportation expenses.

Overall, corporate SG&A expense of $20.7 million represents an increase of $5.4 million or 35.5% compared to the year-ago quarter, driven by an increase in compensation and benefits expense, interest expense, legal fees and higher permit and intangible amortization expense. We estimate that the 4 additional working days in 2023 increased corporate SG&A expense by 8.5% compared to the first quarter of 2022. Approximately 26% of this increase was driven by the acquisition of Patriot Environmental. As a percentage of revenue, corporate SG&A expense during the first quarter decreased to 10.7% compared to 11% during the first quarter of last year.

The decrease in corporate SG&A expense as a percentage of revenue is mainly due to lower share-based compensation expense and lower professional fees. EBITDA of $3.2 million was a first quarter record and up 50.4% compared to $24.1 million in the year-ago quarter. stout the 4 additional working days, we estimate EBITDA would have increased by 41%. The company's effective income tax rate for the first quarter of fiscal 2023 was 25.3% compared to 25.7% in the first quarter of fiscal 2022. The rate decrease is principally attributable to the decreased impact of certain adjustments to financial reporting income due to increased levels of profitability as compared to the first quarter of fiscal 2022.

Looking at the balance sheet. We had an increase of $13.3 million in cash during the first quarter compared to year-end, which resulted in a balance of $35.3 million of cash on hand at the end of the quarter. Near the beginning of the second quarter, we made a $5 million payment on our revolving loan. Our primary sources of liquidity for the quarter were cash flows from operations and funds available to borrow on our revolving bank credit facility. We generated $25.7 million in cash flow from operations during the quarter. We also generated free cash flow of $15.7 million during the first quarter of 2023 compared to $15.4 million during the first quarter of 2022. We continue to pursue various tuck-in acquisitions, and we are prepared to go after more transformational opportunities as they arise.

Now I'll turn the call back over to Brian for some closing remarks.

Thank you, Mark. To recap, we're excited with the strong organic top-line growth we're experiencing in our Environmental Services segment, and we're pleased with the sequential improvement in our operating margin during the quarter. We're also very happy with the progress we're making in our Industrial and Field Services segment, and we are also excited about the opportunities we continue to see relate into our integrated PFAS solution. Finally, we continue to be pleased with the execution in the Oil Business segment despite the volume and price declines we've exceeded the base oil market. This concludes our prepared remarks.

I will now turn control of the call over to the operator to take your questions.

(Operator Instructions) Your first question comes from the line of Tobey Sommer of Truist Securities.

We wanted to make sure you got your question.

I appreciate that. Could you discuss the relative increases in the company's cost or cost to the company, what you're seeing there? And the increases that you're able to pass on to your customers how hard is it to stay ahead and avoid a margin squeeze?

Yes, I'll talk at a macro level, and Mark can chime in. You didn't follow our story in the last post-pandemic. Obviously, we met just a lot of supply chain issues in 2022. Less so today, the issues that we're dealing with now are relative to a backup disposal complex, if you listen to our competitors' conference calls, lots of demand for hazardous waste services.

So our expectation for the balance of this year will fight that issue. The rest of the supply chain has improved. We're not seeing meaningful price increases from other vendors, transportation supply is normalizing now. Just general supplies to support our client base are much better today than they were a year ago. So we're going to be dealing with hazardous lease disposal issues, price increases relative to that.

We're confident as we have over the past 2 years, we can pass the price on. And as you see, looking back at our history over the last 18 months to 24 months, we've really just been treading water on the price increases, matching what people have been hitting us with. We caught up in Q1, we're going to have to react again to what we expect will be price increases probably as Q2 from some of our hazardous waste disposal vendors.

We can get into some of the details off-line, Tobey. But Brian has mentioned that forget year-over-year, just sequentially here, the margin ticked up in Environmental Services. We expect that seasonally, it's usually from Q4 to Q1, usually been sense of the craziness with the pandemic tougher. And while we have seen areas like Trans sequentially getting a little better, even though we haven't capitalized on other commodity impacted cost, let's say, natural gas or whatnot.

Generally, that's coming down. We haven't been able to capitalize on it really fully at our re-refinery word. So it's a bigger part of the consumable because of a hedge that's coming off, thank God. So that's a little bit of a tailwind. But generally, it is disposal that we think we're going to have to react to, as Brian said, here, probably again, maybe as soon as this quarter.

Understood. I'm curious, we've heard about employee retention improving markedly across different pockets of our coverage year-to-date. Maybe the average employee is watching macro headlines a little bit more than one to hunker down. What's the company's experience been? And is there a change that's noticeable this year versus last?

Yes, I'll talk at a high level to it. Mark probably has some data that he can point to. But certainly better, Tobey. It was challenging last year because of demand, mainly around CDL drivers, certainly a shortage of drivers in 2022. Our route trucks require a CDL license. That has improved meaningfully this year because of the slowing economy and the layoffs that we've seen in some of the big box warehouses. We're seeing more robust applicant pools at our brass location, so it's a bit easier to hire.

We still have to work hard with our short-service employees and make sure we train them properly to get them comfortable with our complicated business. That's something that we're working on internally. We've developed a more robust trading program to not just hand the guys, the keys and tell them they're going to start picking up waste. It's a complicated business with a lot of different service lines, as you know, a lot of different EPA waste goes, a lot to learn on the environmental front. But all in all, it is definitely better. So what you're reading is true.

Yes. We've seen -- and it can be sometimes a little dangerous to annualize maybe one quarter. But if we would do that, we're probably on track to -- if we do that with Q1 2023, Tobey, we're probably on track to be a couple of percent lower in total turnover than 2022, which had ticked up from 2021. So 2023 starting out as if it will be lower than the last couple of years that not materially lower, but given what Brian said, just the fact that especially on the rep side, we have, I think, a bigger challenge if you're starting to compare us to other industry players because a lot of our people are both combined sales and service rep responsibilities, and that's always just off the top, I think, are foundationally a lot harder to hire and retain because it is something that most people get into it, haven't done it before.

(Operator Instructions) Your next question comes from the line of Quinn Fredrickson of Baird.

So I just wanted to clarify, go over the outlook comments that you mentioned, Brian, just to make sure I got it right. So I think the industrial and field, you said mid-single-digit growth, and that was quarter-over-quarter and then yes, mid-teens. Is that accurate?

Yes, that's right. Mid to high in industrial and field services and mid-teens in our legacy ES business. We're still seeing robust demand at the field level. But obviously, we read the same thing you guys are reading about macroeconomic conditions. We are a bit more worried about the long term, but tremendous demand out in the field right now.

Okay. All right. So that was the legacy ES comment. Is the Industrial and Field Services revenue? Is it similar to what it was in the first quarter? I'm just trying to make sure we're building a...

Yes, mid- to high single-digit growth sequentially.

Yes. So we expect it to ramp up and in the back end of the year, we didn't go much further. But as much as we're excited with the PFAS opportunity, it didn't contribute much in as far as pure revenue in Q1. So hopefully, as we get more equipment in, obviously, that's dependent on our partners, but we see upside in that, and that will be a bigger part of the revenue growth story as we proceed through the year.

Yes. I think we always signaled that to produce more growth towards the back end of the year just because of what Mark mentioned relative to equipment. But we are fully operational and Grand Rapids now distributing PFAS leachate waste at a commercial level, they were running about 100,000 gallons a day of processing. Currently, we expect that to go to 2 near term. We just added another piece of equipment. So going well so far.

Okay. Maybe shifting gears to the oil business. Can you just update us maybe on production targets for the year and utilization? And then secondly, one of your competitors had mentioned that they're now in a modest charge for oil position here to start the second quarter. Could you maybe give us an update on where you stand today?

Yes. I'll talk a bit from a macro standpoint. We're still expecting our overall base oil production to be in the $47 million, $48 million gallon range. Second quarter is going to be lighter, obviously, because we moved the turnaround into the second quarter, which was the right thing to do for us with the base oil demand being a little bit soft. So we'll produce roughly 11 million gallons in Q2. And then in terms of -- what was the other question? One more. What was the other question? You asked about base oil, which I covered. Used motor oil.

Certainly, we're not at a charge for oil on the used motor oil front because we don't have a significant presence in the western half of the U.S. where the market is a bit different, but we are going to aggressively move our pay-for-oil down substantially, and we hope to get to a low single-digit pay-for-oil by the end of this quarter. So we're going to move it quite a bit over the quarter. We're still relatively long for oil. We've got quite a bit of inventory. So we're in good shape, which will allow us to drive the price we pay for oil down meaningfully over the quarter.

Your next question comes from the line of Michael Hoffman of Stifel.

Just to zone in on the oil, where do you think capacity utilization? I'm just doing the quick math, I think it gets to me somewhere in the 80s for the second quarter versus high 90s, 100%.

That's right. With the expectation of that base oil demand, Michael, is going to pick up.

So I have a curious question, a follow-on on that. So the gasoline supply is tight, and there's been good demand and the gasoline resupply numbers suggest we're driving. So what do you think is happening?

That's a good question. We ask ourselves that every day. I don't know if the recession is impacting people's desire to change oil. I know the export markets are not very good, Michael, as you're well aware. China's economic slowdown hasn't helped that. India's demand is down a bit or at least they had plenty of supply, so they're not ordering a lot of base oil.

So we're not seeing a robust export market conditions. And I think some of our blenders and talking to our wholesale customers are a bit reluctant to fill their tags up with the expectation that pricing may go down a little bit over Q2. So I think hedging their bets on where they think pricing is going to go. We do think demand is going to begin to pick up in Q2. It has to. People are driving, they are going to change oil, so it is going to get better.

So my history with this when it was back and it was independent, it was just safety clean, for instance, that the consumer will lengthen their oil change cycle by a month 1,000 miles. Are you seeing that in the parts washer business that service intervals are lengthening?

We haven't seen any meaningful changes in parts washer intervals.

No. It's actually been pretty good. We also look at another indicator, Michael, where on certain services we can offer if the customer really doesn't need a full service, it depends within the parts cleaning menu, specifically what it is, but a slim-down service. And those are usually the canary in the coal mine for us anyway for our business on the parts cleaning side and that's actually going not much but incrementally lower in the last month or 2. Like Brian said, it all points to -- you can stretch it out a little bit, but it's got to be coming at the way it's got to be here soon. As far as oil change, I mean.

Your next question comes from the line of Kevin Steinke of Barrington Research.

Can you hear me?

Yes, we can hear you.

All right. Well, in the past, you talked about in the Environmental Services segment, you were getting more inbound calls from potential customers due to service shortfalls at competitors and the fact that you retained more staff during the pandemic-driven downturn was benefiting you. Is that still a factor that you're seeing in the market that's aiding your organic revenue growth or other competitors caught up with their staffing? I'm just wondering if you're seeing that elevated volume of inbound calls.

Yes. We're not seeing the elevated volume of inbound calls. There's still having some service issues out in the marketplace, mainly around hazardous waste, not so much the other industrial waste streams and within the hazardous waste category, specifically incineration because there's just a shortage of supply overall in that marketplace, but we're still seeing tremendous demand. And I think we are -- because of the way we pay people, I think we do [outhustle] them because of our commission structure, and that is leading to outsized growth, certainly, but not the level of calls that we were experiencing. But I still think we're going to have outsized growth relative to our peer group.

Okay. Yes, that makes sense. Just thinking about the new Industrial and Field Services segment. How lumpy would you expect that to be from quarter-to-quarter if you get some larger field services projects in? Or is that at a scale where there wouldn't be meaningful ups and downs quarter-to-quarter?

Yes. We've got a pretty good base business. So we didn't do a lot of extraordinary projects in Q1, none that I could remember, we're in the bird flu business and we didn't have any bird flu cases throughout Q1. So no large event project. So that's our recurring base business. Obviously, there are lots of projects for our smaller customers, but we think there's an opportunity to continue to grow that as we expand even out West. We're really starting to integrate our operations. Our guys are talking to each other. The Patriot people are beginning to do some work for our branch locations. So it will be lumpy if we land a big project or 2, but I think the first quarter was mostly base business.

And we're going to try if and when we land those jobs, and I should say, not when we land those jobs because it's just a matter of time when those come in, it's something you can't control. We'll try to call that out and let everyone know what the adjusted version of -- or what the base is what we would call base business is on Industrial and Field Services. So hopefully, that will help going forward.

But our average project is still pretty small. A lot of, it's changing, and that's a good thing. But as it evolves, even on the legacy [side] Patriot, on the legacy side of the business, it's still less than $10,000 projects or per project. So compared to per service and what is now in the ES segment, yes, that's really high, but for industrial field services in general, if you ask [around].

You have another question from the line of Michael Hoffman of Stifel.

Yes. I just wanted to follow up on the demand side, and we all read the same financial news. They're all trying to talk us into the world falling apart. But what are you seeing across either the breadth of the end markets or the types of things you're getting asked for that give you comfort that there's stable demand?

Mike, can you repeat that? We had an audio problem.

Yes, no problem. So Brian, you were comfortable about talking about there's still good strong demand, and we're all reading and hearing the same financial news is trying to talk us into a recession. But what are you seeing between the breadth of either the customer base being widened helped by Patriot as well as your own efforts in ES or specific activities that -- like is there reshoring influencing this? Or is there infrastructure IIJA spending happening that's trickling through the model? What's giving you comfort about there's a decent demand environment from your perspective?

Yes. I don't think any legislation has created any additional demand, Michael, at least through the first quarter. We don't expect it in the second quarter. I'm getting my information just from routine phone calls with our branch personnel and they're not experiencing any slowdown at the manufacturing level with their individual customers. Nobody is reducing production out in the field, which would impact our business.

So we talk about at least in our prepared remarks that we worry for the same reasons you do because we're trying to talk ourselves in the recession, but we're certainly not -- but not a lot of infrastructure growth or opportunities relative to that we're seeing so far. I haven't seen a reshoring of any additional manufacturing opportunities near term. There are lots of talk about projects being developed, but they're not producing waste yet. We're very bullish to the ES for sure.

Yes. And California had terrible weather and you now have a bunch of new assets in California. Was that disruptive?

No, it really didn't hurt us that much. We actually produced a little bit of flood-related emergency response work as a result of the bad weather there. So not really a negative for us.

Yes, especially in January, it did help the Patriot business. Usually, that's a pretty slow time for them. But that flood work helped.

There are no further questions at this time. This concludes today's conference call. You may now disconnect.