Orion Energy Systems Inc (OESX) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Orion Energy's first-quarter fiscal 2015 conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

Now I'll turn the conference over to your host, Forrest Hunt of The Equity Group. Please begin.

Thank you. The Company issued the announcement of Orion's fiscal 2015 first-quarter results this afternoon. The release includes a section that briefly describes the supplemental information document that was posted to the Company's website. This supplemental information provides further additional details and analyses of Orion's financial performance for the fiscal first quarter ended June 30, 2014.

We will also be utilizing a slideshow presentation in conjunction with this call. The presentation is available on Orion's website in the investor relations section. We welcome each of you to review this presentation and follow along.

I will now read the Safe Harbor statement. Remarks that follow, including answers to questions, include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified as such because of the context of such statements will include the words such as believe, anticipate, expect, or words of similar import.

Similarly, statements that describe future plans, objectives, or goals are also forward-looking statements. These forward looking statements are subject to risks that could cause actual results to be materially different. Those risks include among others matters that we have discussed in our press release issued this afternoon and in our filings with the Securities and Exchange Commission.

Except as described in these filings, we disclaim any obligation to update the forward-looking statements, which may not be updated until our next quarterly conference call, if at all.

With us from the Company today is John Scribante, Orion's Chief Executive Officer; and Scott Jensen, Chief Financial Officer. John will provide a brief update on business operations and opportunities in the market. Scott will then reviewed the first-quarter financial results and lastly, John will return for a few closing comments.

And with that, I would like to turn the call over to John. Please go ahead, John.

Yes, thank you all and good afternoon, everybody. Our results for the quarter demonstrated progress in our strategy as we delivered solid growth in bookings, which led to the largest lighting backlog in two years.

And while our total revenues grew slightly quarter over quarter and margins dropped due to low plant absorption and some changes in product mix, we remain very optimistic about the remainder of the fiscal year. One very significant development in the quarter was that our LED sales as a percent of revenue grew to nearly 30% in June and finished at 21% for the quarter.

In fact, our LED sales have doubled each quarter in the last five quarters. This is solid progress in LED sales for Orion and an indicator that our strategy is on track.

There's further evidence that our strategy is working. First, our January entrance into the commercial office space significantly increased our addressable market and has resulted in a large build up of bookings and backlog, driving our LED sales faster than expected.

To put this into perspective, Orion traditionally served the high bay retrofit market, which has an estimated 67 million installed light fixtures. Yet the commercial office space has nearly 1 billion installed light fixtures.

That is a market 15 times larger than what we had to work last calendar year. And with our patent pending LDR retrofit product and close to the customer sales channel, we can command a significant portion of this installed base.

Second, our strategy to add more key Energy Service companies, or ESCO resellers, has resulted in new revenue that will drive a large portion of our growth in this fiscal year, utilizing the LDR line as a lead-in to new customers. Adding to this, we expect to expand our (technical difficulty) later this year, which will fuel more and more opportunities to support these channels.

And just a note on our ESCO relationships. Our success in growing this channel 77% in the last quarter had more to do with our exceptional customer experience and talented people serving these customers than did our products.

Our key strategy in winning new business is in the way we engage, service, and support these customers. And while there are some ramp-up time before these ESCOs deliver their full potential with us, this is a winning strategy that will result in growing our revenues and margins.

We secured a number of large wins that due to timing will largely be reported as revenue in the next two quarters. While this affected short-term sales in Q1, it has created a healthy backlog of lighting orders that is the largest since this management team took over in 2012. These orders include a whole new set of customers that Orion had not pursued before.

Let me highlight a few of these wins, starting with the new order from our engineered systems channel that we are very excited about. We executed a contract with a large national retailer to supply retrofit solutions to approximately 27 of its locations.

The delivery and installation of approximately 31,000 LDR fixtures is scheduled to begin in the Company's current second quarter, with a potential for several hundred thousand additional fixtures to come. This agreement represents the Company's largest sale of our LDR product since its introduction in January and the largest LED order in the history of Orion.

Second, we signed an extension with one of the United States' largest small box retailers to remain their supplier of lighting solutions for their new stores. We issued a press release on this a few weeks back and the customer asked us not to disclose its name, but between Orion and Harris Lighting, we have supplied this customer with over $20.5 million in lighting sales since 2008. It has been an incredibly successful partnership for us, as reflected in the contract extension.

We also announced the Company has signed an exclusive agreement to retrofit a major auto manufacturer's plant in Canada with the LED high bay fixtures for $2.4 million. The Company expects to complete delivery within the next 60 days and installation in the next 180 days, with the majority of revenue to be reported in the Company's current second quarter.

Those are just a few examples of our lighting solutions for customers in both retail and industrial sectors and include our new LED product offerings. The LDR product, which we only introduced in January, is our single largest selling product.

The ramp-up in customer interest is largely due to its quality, energy efficiency, and ease of installation. When we get this product in front of potential customers, we have a significant advantage that leads to winning.

So let me highlight how we are enhancing some of our sales efforts in a cost effective manner under a defined strategy. Within our engineered systems division, we have aligned its focused around large multinational, multi-site rollouts opportunities. We target national accounts where an entry point could potentially lead to large orders in a short period of time and then a contractual agreement with large portfolios.

In addition, our national account installed base provide -- Canada is for upgrades to our newer LED products under new contracts. We remain very positive of the growth trends emerging in this channel and we have a number of talented individuals within our engineered systems division who have demonstrated their ability to deliver growth in national accounts.

Our US markets division continues to multiply its field force with the addition of several new salespeople since May. And while several hundreds of contractors and resellers buy Orion product, the US markets division concentrates on ESCOs, or Energy Service companies. This division increased the number of key ESCO resellers from 30 to 53 in just the past three months.

While important, the number isn't the only key element. It is keeping these companies engaged, equipped, and driving sales. We can provide the best quality product, better service, short installation and lead times, and more profit for these people to grow their businesses.

These key ESCO resellers currently comprise approximately 63% of our existing indirect channel revenue in quarter one and we see this channel as a significant path to growth and profits. Our distribution services division, which markets products under the Harris brand, is building off the original product -- Harris product line, while adding more and more products each day and selling this line through traditional electrical distributors.

While small today, we see this division as one -- as the one that can grow the fastest and contribute handsomely to our earnings in the future. In fact, one of our distribution -- or distributors in this channel has landed a contract with Sam's Club for the LDR product line. And as we speak, that product is being sold online at samsclub.com, and we certainly like the potential for online sales of this product, given it's delivered as a complete solution.

To sum up our sales efforts, there are a number of different avenues in which to grow. We have the industry's best people, great products, manufacturing capacity, growing channel, and a massive market that is opening up directly ahead of us. We see many favorable trends that we are uniquely positioned to dominate.

When this management team took over in 2012, our challenge was achieving operational efficiencies and turning around a company that had seen better days. This included a restructuring of our Company in advance of the inevitable industry shift to the more demanded LED products.

Throughout the past two years, we worked diligently to ensure that our organization was properly structured to keep expenses down, while preparing ourselves for this paradigm shift. We are largely through the OpEx side of Orion's transformation and are heavily focused on generating revenue and improving gross margins.

And regarding our cost of goods, since our LED volumes are increasing, we expect to see our gross profit steadily increase in future quarters in these lines due to manufacturing efficiencies and sourcing leverage. We all recognize that there was going to be challenging transition into a customer-driven company with a decidedly new brand image.

This transition, along with the much discussed slowness of adoption by commercial and industrial retrofit customers, has led to delayed sales in the short term. However, we have been adamant about these financial results do not reflect the long-term potential for Orion. We essentially reshaped a company selling $70 million of legacy product into newly refocused company with industry-shaping products positioned to capture massive new markets.

While not an easy task, in the first quarter, we started to see the beginning of a long awaited turn, and while still a bit volatile, our outlook is growing more favorable each day.

With that, let me turn it over to Scott for a review of the financials, and then I will come back with some closing comments.

Thanks, John. I will briefly go through the quarterly highlights, but first, I welcome each of you to review our press release and the supplemental information for additional detail on our financial performance.

We reported total revenue of $13.3 million for the fiscal 2015 first quarter compared to $20.9 million in the prior-year quarter. The decrease in revenue was a result of the continuing delay of customer purchase decisions that pushed a number of orders into our backlog.

In addition, we reported a decline of $3.9 million in solar revenue year over year. Our quarterly LED revenue shows that we are on track to exceed last year's growth of 157% year over year.

We are very pleased to see revenue from Orion's LED products increase to $2.55 million during the quarter, or 20.9% of total lighting product revenue. This compares to $1.1 million, or 7% of total lighting product revenues, in the prior-year period.

While a growing, but still smaller piece of our sales at this point, we believe LED products will be the new driver of our Company's sales in the coming years. Total gross margin was 19.6% for the fiscal 2015 first quarter compared to 27.4% for the prior-year period, largely as a result of the decline in revenue and the impact of our fixed manufacturing costs.

As we have noted in the past call, our goal is to continue to ramp-up to a more efficient scale in the short term, which would typically lead margins into the 30% range. This contributed to the Company reporting a net loss for the period of $4.4 million, or $0.20 per diluted share, compared to a net loss of $800,000, or $0.04 per diluted share, in the prior-year period.

Finally, on the balance sheet, we maintained a strong capital position throughout the fiscal 2015 first quarter. At June 30, 2014, we had $16.3 million in cash, with working capital of $29.7 million and total debt of $5.8 million. During the quarter, we continued to divest our business of non-core assets, selling our facility in Plymouth, Wisconsin, and generating $1 million of cash from the sale. We remain comfortable with our current liquidity and our capital position.

Before I turn it over to John for a few closing remarks, let me discuss our outlook for the remainder of fiscal 2015. Largely to follow up on John's comments about our strong backlog, we continue to anticipate total revenues for fiscal 2015 will range between $80 million and $105 million. This is based solely on our organic projected sales growth of LED lighting solutions through both our US markets and engineered systems business units. We intend to provide an update on this every quarter and also may revise as necessary upon a given event, such as an acquisition.

With that, let me turn it back to John for a discussion of our growth strategy for fiscal 2015 and closing remarks. John?

Great, thanks, Scott. We continue to see Orion's strength matching a number of larger trends in the US retrofit market. While industry-wide sources are varied in their estimation of growth in the lighting sector, two consistent messages are clear. There is accelerating growth and LED is driving it.

And we feel that Orion is in the right spot, focusing on retrofit solutions where our sellers and reselling partners can easily upgrade older lighting systems with new solid-state LED solutions.

During June, the last month of the quarter, LED sales were nearly 30% of total revenue. And for the quarter, sales of our LDR product was over 78% in our commercial office sector. For the remaining of Orion's fiscal 2015, we are focused on expanding our product offering with a significant product launch later this fall. Consistent with the Orion heritage, this product launch will include flexibility and technology that our customers cannot get in the current marketplace.

The adoption rate from our customers of our LDR product is very encouraging, but also has served as a precursor to what our customers want and what Orion intends to provide them. We have exceptional people. The channel is in place.

The market is massive, and we have the advantage over our competitors in that we have a unique customer experience, factory capacity, higher quality and unique product, shortest lead times, full-service offerings, and a better total solution. By providing the most robust customer experience in the industry, Orion will continue to earn the business of the world's finest customers.

While we started to see pipeline and bookings growth in the latter half of the fiscal first quarter and into the second, there is still so much more to grow. We are investing proactively in corporate rebranding initiative that highlights Orion's position as the leader in retrofit solid-state LED solutions and will run concurrently with our fall product launch.

One substantial piece of this rebranding is emphasizing our new direction towards LED products. We will also continue to expand our sales force and support this initiative to add new management talent to drive more sales and cultivate relationships with our ESCO partners.

And to that end, one final postscript. I am pleased to announce that after a short leave of absence, Mike Potts, our Chief Financial Officer -- Chief Operating Officer has returned to work and is 100% ready to propel this Company forward. Mike has a deep level of experience in the industry and will be a great contributor to our success going forward.

Operator, let's take some questions.

(Operator Instructions) Philip Shen, ROTH Capital Partners.

Let's start by talking about your sales cycle. Can you give us some visibility into the customer purchasing behavior? What can you guys do to accelerate the sales cycle overall? And you talked about delays in purchasing behavior, what are you guys doing to accelerate that and how do we improve things?

Well, I will say that the sales cycle in our LDR product line appears to be shorter than what we experience in the industrial side of the business. The industrial side tended to be much more driven around capital expenditures and capital expenditure cycles.

What we are finding on LDR is that it has become much more of a focus around just energy savings and getting -- a lot of retail business right now is driving a lot of that. Most of those sales are in a retail environment with some commercial office.

But it seems to be much more of an energy savings driven around current needs as opposed to more of a capital expenditure cycle. So we are seeing a faster growth in the pipeline and quicker sales cycle in the commercial office sector.

The other thing is we -- well, I am not going to get into a lot of the specific strategies on how we are working towards shortening sales cycles. We are taking a different approach around the people that we hire, the experience that they have, and the structure around how they are approaching each individual market that they serve. So there's some specific initiatives there that we are taking underway to do that as well.

Great. Are you guys playing with the idea of using financing to accelerate your sales at all? I know you guys have the OTAs, OTAs. Is that being discussed or use that as an opportunity to, again, push sales through?

Yes, it is certainly one of the options that are presented as part of our selling process. And while it has some attraction in some markets, there are some limitations that people consider when levering their own business.

And so it is clearly part of the strategy. It can accelerate sales in some cases, but it is still a market right now, particularly on the industrial side, that levering up and adding the long-term commitments is just generally not what our best customers are looking to do.

Not to say that it's not a solution in many cases. I think about 15% of our sales are so is transacted through a financing mechanism. So it is still there. It's just -- I think it is the nature of all lot of our customers, if they are a large Fortune 500, they tend to be very fiscally conservative and going out more than a couple of months on any sort of commitment.

Okay. Great. One more and I will jump back in queue. Historically, you guys have talked about sales cycles taking anywhere between seven and nine months. You said earlier that the LED, LDR sale cycle was shorter than the industrial side. Can you quantify where each one, where each segment or product line, is in terms of what the gestation period might be?

Yes. I can't get real specific. I just don't have those figures available at the moment. But intuitively, we see LDR fixture sales in a one sales call close. Not to say that they are all that way, but it is rare to find a high bay or an industrial sale take place in the lobby.

So the -- what we are generally seeing is that the intuitive nature of the product is generating the interest in moving quicker. It is just a very easy-to-understand product with a very straightforward proposition in a space that traditionally didn't have all lot of options. So you compare that to the industrial, which every facility can be incredibly complex and specific. There are a lot of things to consider beyond just lights or just beyond just energy.

There's a lot more complexities in the industrial environment, whether it is ceiling heights or whether it is contaminants in the air due to processes or heat or temperatures you just don't have in the front office.

And so that LDR product space is one that we see, as I have mentioned in my comments, a fast-growing and a fast build on the pipeline. And having a sales force that is equipped with some unique selling tools gives us an advantage in the marketplace. And it certainly shortens the sales cycle.

I don't think the industrial sale has changed a whole lot, other than a complexity and a delay in buying decision, just due to the new factor of do I have to consider LED in addition to linear fluorescent and what is that going to do.

And if that adds another three to seven months to the decision, as we had commented on prior calls, we are expecting that these sales are still going to happen. They are just going to happen later in the budget cycle of our customers, which is really in our third quarter -- the latter half of the second quarter and going into the third quarter.

Great. Thanks for the color, John. I will jump back in queue.

Steve Dyer, Craig-Hallum Capital.

Question on the backlog. Was wondering if you could give a little bit more color. The wins that you detail on page 5 of your slide presentation: the small box retailer, Ford, and then the large national retailer. Are those all in the $7.4 million backlog or were some of those after the beginning of this quarter?

The small box retailer will be run rate business that will continue to bring purchase orders in around new store openings. The manufacturing-- that's in-house as is the retailer and we'll expect to record the majority of the product revenue in our second and third quarter as product ships. And then the installation revenue will follow in the third and fourth quarters. Just the timing of installing of a major project within one location.

Okay. And this will be probably a little bit difficult to project, but when you net everything out, would you expect your backlog at the end of the second quarter to be above or below or kind of in line with what you saw at the end of the first?

So it will certainly be dependent upon the rate of new orders coming in. I expect that we will work through a portion of the larger customer opportunities in the backlog. And then as John talked about, the LDR with new orders coming in and a lot of field demos that we are doing right now.

And, I guess, a reminder, too, that product just hit the marketplace in January. So as we are developing sales experience and closing rates and gestation, we are still working through a lot of new data.

So I can specifically tell you, Steve, What we are seeing is accelerated adoption. We are encouraged by the interest, by the orders that we are receiving. But I can't tell you specifically if it will be higher or lower than the current quarter.

Okay. And I don't mean to parse the guidance too much, but any sense as to what kind of an acceleration we are looking at in the second quarter? In other words, maybe how much revenue in the first half of the year versus the second, just for modeling purposes?

Yes, we are still -- our historical trend rate, where we see 30% to 40% of the revenue in the first half of the fiscal year, that is still is what we are tracking towards right now and what our expectations are -- John's comments about really seeing the December quarter start to increase around capital budget allocations. We are not seeing anything that would lead us to believe that those same splits aren't appropriate for our current fiscal year.

Okay. And then with respect to gross margins, do you have kind of a quarterly run rate that you need to hit to get that 30% bogey that you talked about or how do we think about that progression throughout the year?

Yes. That's a great question. So we continued to work on some sourcing initiatives to drive component costs down. Certainly, volumes will help. If you look at our first-quarter results in the midpoint of our guidance range, that would suggest we need gross margins just under 32%.

And those our gross margins on the lighting side that we have certainly hit in the past. And with the revenue improvements coming in the back half, as we expect the LEAN initiatives that we have been working on in the facility and we really haven't had the benefit of volume driving those efficiencies yet, I think that that 31% to 32% gross margin range to just hit the midpoint as a reference, Steve, very attainable for us.

Okay, given -- even including the revenue numbers you are talking about this year?

Yes.

Okay. And I'm sorry, I missed your commentary. I thought I heard you say something about Sam's Club and I missed what that was about. Could you repeat that?

Yes, we have a reseller, one of our -- out of our US markets division. A reseller who had landed a contract with samclub.com. Well, the Sam's Club. And they have placed the product out on the website. Or really, it is positioned more for the small office, homeowner, maybe a market that isn't necessarily doing a large install.

But it is another avenue for that product to get out on a worldwide basis into the space and we attribute that to one of our resellers who brought that to the table. And we anticipate that it could have a nice impact to add volume, to help improve the margins as we go forward.

Okay. And then lastly and I will hop back into queue. How should we think about the progression of operating expenses throughout the year? I mean, I know it is going to increase, but any sense of magnitude?

Yes. It -- John touched a little bit that we are bringing on additional field sales. We continue to recruit for talent and to help support both the US markets and the ESCO partners out in the channel. Our nationals accounts team has had some recent adds as well.

And so I would expect that certainly on the volume side, sales and marketing will trend up and follow revenue in the back half of the year, Steve. Our G&A expense tends to be heavier in our first quarter, simply as a function of some of our year-end audit and legal, some of the compliance costs. So that should be relatively stable and should taper down a little bit to follow historical G&A run rates.

But sales and marketing will be where you see the growth?

Sales and marketing and then product development. The R&D side. We have got a fair number of products right now in the queue that we are getting to the finish line with the launch later this year. So we will start to see that trend up over the next two quarters as well.

Okay. Thanks, guys.

Jeremy Hellman, Singular Research.

Jeremy in for Tom here. Just had a question about the competitive landscape in the LED market. Are you seeing more competition from mom and pop type outfits or the larger companies?

[Kind of changed it] -- the segments, the different sectors. I think in the exterior line, it is more the larger players that are really making some moves.

I don't see a lot of mom-and-pops in the commercial office space, but the high bay market has always been filled with -- I think what -- I guess what I am trying to say is that there is a shift that is moving and you are seeing more consolidation mostly on the exterior. I'm seeing a lot less of the smaller players out there. But the office has been not always really the big players.

Okay. Appreciate it.

Tyler Page, Baker Avenue Asset.

Just want to go back to the gross margins. I am curious about the difference between the national resell -- the national accounts and the resellers, and if you could speak towards what the shift to a larger proportion of revenue from the resellers will do to the margins.

Yes, good question, Tyler. We experience a few basis point difference -- 200 to 300 basis point difference -- between the national account and the US market channels, with the US markets channel being a little higher on the contribution side.

So as we expand that channel, it should have a favorable impact to us. The gross margins are fairly similar, though, if you think about national account pricing and then resellers, who have to take the product to market. There's not really a sizable or significant difference between the two channels.

Great. Thank you.

George Gizbar.

I'd like to dwell a little bit more on the inside, when you look at the LED sales number for the quarter being $2.6 million and your total sales being $13.3 million. Can you explain the differential in there with specifically that encountered? Was that HIF or can you explain that?

And then could you also elaborate on your forecast, which I believe may be -- correct me if I'm wrong -- was $80 million to $105 million or something like that. Now you are saying $80 million to $105 million or whatever.

But even if you did $80 million, that means that you have to average $22 million per quarter in the last three quarters and on top of what you recorded in the first quarter. Is that really a doable situation? I mean, that's a pretty aggressive upside from first quarter situation. Can that be already accomplished in the second quarter?

Sure, thanks, George. There was a number of questions there, so I will try to touch on as many as I can. And then if I have missed anything, certainly let's circle back.

You touched on the revenue break out for the first quarter at $13.3 million. $1.1 million was solar projects continuing to work through the pipeline of PPA that we have in place with a long-standing national account customers, some renewable energy credits that we sold. And then another $0.5 million, or almost $600,000, related to service revenue on our lighting projects.

So if you eliminate the two of those line items, you get down to the $11.6 million of lighting product revenue. $2.6 million being LED and the balance is really a commendation of legacy, high-intensity fluorescent, some products that Harris takes to market. Exterior products. And then just other accessories, controls, day lighting products.

Your question then, too, on the guidance -- the guidance range was unchanged for this quarter for the fiscal year, $80 million to $105 million. We have always had our low-water mark in terms of quarterly revenue in our first quarter. And we are actually very encouraged by the amount of bookings in the quarter. Compared to historical years, bookings have been up.

They have been tracking very nicely, certainly driven by new products. But at this point, carrying the backlog that we are and our expectations for pipeline conversion and just what we are seeing in both of our business units, the national account side, engineered systems, the US markets with bringing on you ESCOs.

And then the success, the early success of the distribution side and the placement of -- at Sam's that John talked about. There is no reason from our standpoint that we don't believe we could hit an average run rate of $22 million over the back three quarters of the year.

Okay. And, all right. Now and that, as you look at your LED portion of this going forward, you would have to have a tremendous uptake and starting even the second quarter, when you look at the average rate being in the $20 million, $22 million range per quarter.

I would assume that you are talking that the most significant lift off to get that revenue stream up from the $13.3 million of the first quarter would have to come from the LED. So you are suggesting here there is going to be a very huge leap from this $2.6 million in LED sales in the first quarter. And I correct on that, or is my assumption wrong?

No, you are, George. A fair amount of our backlog, the $7.1 million of lighting, is heavy on the LED side right now. Orders that have come in that will be shipping in the second and third quarter and completing. So that is consistent with our expectations that LED is just going to continue to become more and more of our revenue mix in total and really going to drive our growth in the future.

Okay. And as you are looking now at your ability or your projections getting up to where you are still talking low side $80 million for the year, how do you view your operating structure in Manitowoc and your plant as far as current employment and how you see being able to handle this uptake from where you were in the first quarter, personnel-wise?

We have been working very diligently within our operations and plant group and engineering, all the way down to the workers on the plant line, the assembly lines, to proactively embrace LEAN manufacturing initiatives. We have improved efficiencies. We have compressed the space to eliminate redundant costs, additional handling costs.

We are very well positioned right now to be able to bring additional volume into the facility without having to add headcount. We have effectively absorbed the old Harris manufacturing production activity into Manitowoc without any of the people being added.

So we have got a lot of leverage available to us. We've, again, worked diligently to be able to hold the line as best we can and certainly it will be a function of the acceleration and the momentum of products coming in and how we might need to scale up production, if it calls for.

But right now, we feel highly confident that we'll be able to meet our targets for the year around growth margins, based upon manufacturing costs. And our ability to leverage some volume. LED is still, even at 20%, a smaller mix than what our florescent run rate has been. So we will get some purchasing power as we continue to see volumes increase.

And we also intern -- on the -- in the manufacturing facility, we have rebuilt the plant in such a way and reorganized the plant in such a way that we can absorb the spikes that historically we hadn't been able to do without adding people into the mix. Whereas, today, we can have a significant fluctuation in the order run rate without affecting the ability of the plant as it currently sits to absorb those spikes.

Okay. All right. I will go back in the queue. Thank you.

Thank you. There are no further questions at this time. I would like to turn the call over to management for any closing remarks.

Well, great. Well, thank you, everybody, for joining us on this call. We appreciate your support and look forward to great things coming ahead of us. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.