Renovare Environmental, Inc.
Q2 2019 Earnings Call Transcript

Published: 15 Aug 2019

[Operator:]

Good day, ladies and gentlemen and thank you for standing by. Welcome to the BioHiTech Global Second Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.Before I turn the call over to the Company, I want to remind listeners that during the call, Management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore the company claims protection under Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today and therefore we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC.In addition, any projection as to the company's future performance presented by the management include estimates as of today, August 15, 2019 and the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided in this call are available at www.biohitech.com on the Investor Relations page.I would now like to turn the call over to Mr. Richard Galterio, Executive Vice President of BioHiTech. Please go ahead, Mr. Galterio.

[Rich Galterio:]

Thank you, Operator, and good morning, listeners. Welcome again to the BioHiTech Global Second Quarter 2019 Financial Results Conference Call. In addition to myself, with us today are Frank E. Celli, our Chief Executive Officer; and Brian Essman, our Chief Financial Officer.I would like to start off by providing a brief overview of our business progress in the quarter followed by a more detailed discussion of our financial results from Brian Essman and then we will turn the call over to Frank, our CEO, to provide an overview of our growth strategy as we move through the remainder of 2019.During the quarter, we achieved 15.6% revenue growth which was driven by the early stage of commercialization at our HEBioT facility in Martinsburg West Virginia. The Martinsburg facility is the first of its kind facilities-based solution in the United States that diverts as much as 80% of municipal waste from landfills while producing a renewable Solid Recovered Fuel or SRF.This SRF is an EPA-recognized renewable fuel that can be used as a partial replacement for coal in industrial application. We spent the second quarter going through the commissioning phase, where we tested and optimized each phase of the plant's operations including the receiving area, mechanical sorting, bio-oxidation hall and refinement. As this is new technology toward this country, we did encounter a number of unexpected hurdles which lengthened the process and slowed our ability to increase utilization rates as we had originally planned. After overcoming these hurdles, the facility began producing SRF later in the quarter that underwent a series of internal and independent laboratory testing to ensure it would meet specifications per use by our end customers.This testing process was also lengthy and was successfully completed, enabling us to commence fuel delivery in July. While the whole process took several months longer than expected, we increased utilization every month's end and expects significant sequential increases in revenues for the remainder of the year which Frank will discuss later in this call.In addition to our success in bringing the HEBioT technology to the United States for the first time, we accomplished several other important goals to position the company for future growth. First, we received an initial multi-unit product order for our new BioHiTech sapling food waste digester from a regional grocery chain operating 19 locations in three northeastern states. We launched the sapling in Q1 which is a larger capacity addition to our line of Revolution of Series Digesters.This model as well as other Revolution Series Digesters provide a cost effective regulatory compliant solution that safely disposes the food waste on site, eliminating the cost and Co2 emissions associated with traditional waste tolling [ph] while reducing test-related issues typically associated with food waste storage. We have already commenced delivery of these units and are excited about the prospects of these new product addition.Second, we raised $1.885 million in an over-subscribed offering of units during the first and second quarter of 2019. The offering consisted of Series D preferred shares and warrants to purchase stock at a fixed price of $3.50 and was led by management and a number of long-term investors in the company.And third, we completed the sale of our 2.2% equity interest in Gold Medal back to the parent in July of 2019. This enables us to focus our financial resources on our HEBioT and Digester technologies. We invested $2 million of those proceeds from the sale into our Martinsburg facility through our majority-owned HEBioT development subsidiary. This enabled us to increase our ownership interest in the Martinsburg facility to approximately 86% at the subsidiary level and give us a 52% majority interest at the corporate level.We will continue to provide Gold Medal, our partner in the HEBioT subsidiary with management oversight of its growing waste management services business and look forward to working together with Gold Medal to forward our HEBioT development road map.At this time, I would like to turn the call over to Brian Essman, our Chief Financial Officer to discuss our financial results.

[Brian Essman:]

Thank you, Rich, and good morning to everyone. Total revenue on the second quarter of 2019 grew by 15.6% to reach $1.051 million compared to $909,000 in the second quarter of 2018. While recurring revenue derived from rental service and maintenance decrease 2.1% to $448,000, the decrease was the result of the improved reliability and performance of our Revolution Series Digesters requiring significantly less billing for on-site services.In fact, our core rental revenues from digesters, under rental contract actually increased by 31.9% or $84,000 in the quarter due to a 31.8% increase in units under rental contract. The larger rental base in the improved efficiency led to a 43.9% decrease in expenses relating to the recurring digester business as well as lower levels of non-rental service in parts revenues and the resulting expenses.The contribution before depreciation from rental, service and maintenance activities increased by $90,000 or 39.2% from $230,000 in the second quarter of 2018 to $321,000 in the second quarter of 2019, resulting in a contribution margin on the related sales of 71.4% in the second quarter of 2019 as compared to 50.2% in the second quarter of 2018.Digester rental and related revenue were accounted for 43% revenue in the quarter compared to 50% in the second quarter of 2018 as we continue to diversify the base. Our HEBioT operations contributed meaningful revenue for the first time, totaling $277,000 or 26% of total revenue. This new revenue stream reflects the initiation and commissioning of the Martinsburg facility that we acquired our controlling interest in December of 2008. Revenue from management advisory fees related to our management services contract with Gold Medal remain constant at approximately $250,000 and we expect this revenue to remain at this level for the foreseeable future. This revenue stream represented 24% of total revenue compared to 28% of total revenue in the second quarter of 2018.We reported $75,000 in digester equipment sales in the second quarter of 2019 compared to $200,000 in the second quarter of 2018. As we noted in our earnings release, we have recently seen an increase in direct sales interest from several large perspective customers and we'll discuss this in greater detail later in the call.Operating expenses in the second quarter in 2019 increased by 39.1% to $2.97 million compared to $2.14 million in the second quarter of 2018. The increase in expense was mainly the result of a $495,000 increase in depreciation expense and $490,000 in HEBioTic senses associated with the startup of the Martinsburg facility, partially offset by $100,000 decrease in digester rental service and maintenance expenses previously discussed.In addition, there was a $70,000 increase in digester sales expenses. Excluding the new HEBioT related expenses, selling, general and administrative and professional fees decreased by $267,000 or 15.8% compared to the second quarter of 2018. We recorded an operating loss of $1.9 million in the second quarter of 2019 compared to an operating loss of $1.2 million in the second quarter of 2018. The net loss was $2.9 million in the second quarter of 2019 compared to a loss of $5.5 million in the second quarter of 2018 inclusive of $3.5 million in interest expense incurred in warrant valuation and conversions.In the second quarter of 2019, our net loss was $0.15 per share on $14.9 million weighted average shares outstanding, compared to a net loss of $0.40 per share on $14.2 million weighted average shares outstanding.Now to our balance sheet. We ended the second quarter of 2019 with $1.7 million of unrestricted cash with shareholders' equity of $8.8 million compared to $2.4 million of unrestricted cash with shareholders' equity of $10 million as of December 31, 2018.I will now turn the call over to Frank to discuss our growth strategy as we move through 2019.

[Frank Celli:]

Thank you, Brian. We've made significant progress in the second quarter and I want to take some time to emphasize just how important the successful commercialization of this first HEBioT facility in the United States is to our company and its stockholders.Remember, our facilities converting household trash into a renewable fuel and diverting about 80% of that trash from landfills. Prior to the plant's operation, the vast majority of that waste would end up in a landfill. What does that mean for the environment? Well, when we reach plant capacity, the reduction in trucking miles and landfill emissions will result in about 250,000 less metric tons of carbon dioxide released into the atmosphere each year. That's the equivalent of 28 million gallons of gasoline or 44,000 homes worth of electricity usage. That doesn't factor the additional reduction in mining and related emission savings when you replace coal with our fuel.Now that the plant is open and we've begun to successfully delivery fuel, the waste industry, other municipalities and many fortune 500 companies have taken notice. In fact, the demand for our fuel has been increasing every day. In addition to our contract with Argos, we have secured a second contracted party and are having multiple discussions with other potential buyers of our fuel. At this time, we've got more fuel demand than production capacity at Martinsburg and this sets us up very well for our road map of potential future HEBioT facilities in New York state, Pennsylvania and New Jersey.We also have numerous additional companies interested in delivering waste to the facility to meet their sustainability goals. With this demand on both feedstock and offtake [ph], we've got no doubt that we've got the right formula for sustainable growth for years to come.With regards to our digester business, we're very pleased with the reliability of our revolution digesters and the outlook that we see for future success. The underlying health of that business is evidenced by increases in the recurring rental revenue for our install of digester base and our higher contribution margins from that revenue. We've talked about the longer sales cycles for larger opportunities for a while now and while our revenue growth trajectory has been modest at this point, our pipeline is by far the largest and strongest we've ever had. With the regulatory environment continuing to get more astringent and with the growing call for corporate America to become more environmentally responsible, we're seeing a heightened level of interest in activity from a variety of potential customers.I'd like to highlight some of those opportunities and why we're so excited about the future of the business. I see our larger customer opportunities in this business in two tiers

[Operator:]

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Theodore O'Neill with Ascendiant Capital Markets. Please proceed with your question.

[Theodore O'Neill:]

Thank you. Congratulations on a good quarter.

[Frank Celli:]

Thank you, Theodore.

[Theodore O'Neill:]

I have three questions. One is what sort of things have you learned as you work to get the HEBioT facility to meet the standards for your customer? And in regard to direct sales versus rental, is there something going on in the marketplace that makes direct sales heavier going forward? Or is it just a timing thing? And finally, can you give us an update on the application to build the HEBioT facility at Rensselaer?

[Frank Celli:]

Yes. First question about what have we learned -- let me split that question in maybe two parts

[Theodore O'Neill:]

Great. Thanks a lot.

[Frank Celli:]

You're welcome.

[Operator:]

Our next question comes from the line of Ronald Nash with Nash Partners. Please proceed with your question.

[Ronald Nash:]

Yes. Good morning. You mentioned in your [indiscernible] there was delay in the fuel from the time that you thought you delayed out. Is the delay because of the FDA or is it because of the customer base that require so much more? Would you expand on that a little bit?

[Frank Celli:]

Yes, Ron. Thank you by the way. As I mentioned this, you know, I would say the delay was certainly not in the manufacturer. We were able to manufacture the fuel as we expected. There was a rigorous process of both internal testing, their own independent testing as well as state regulators testing. There were three steps essentially in sort of what I would say the approval process to actually begin to deliver and combust the fuel. I would say it was not real -- I don't think it was a delay. I think it was a process that ended up being multiple steps before, as I mentioned, the buyer of the fuel was comfortable in saying, 'hey, we're going to take your word for it and we're going to burn something that used to be waste in our billion-dollar facility'. You could imagine they don't take those things lightly. And I don't blame them to be quite honest with you.No, we didn't hit any bumps in the road where test results didn't come back in a fashion that we didn't expect or couldn't deal with. Obviously the first batches of fuel came back and tested not compliant to what we need it to be, but that wasn't unexpected. That's what gave us the road map to make the modifications for the operation which we have done and then achieve the test results we needed to achieve. I think it was just processed, Ron. And I don't blame ultimately the buyer. They're not going to burn this stuff without the state regulators and yes, it's a go. They're not going to jeopardize their existing business. The fact that we've been through the process now however and been approved, I think is certainly a great indication that going forward in the future, we understand exactly what to manufacture, how quickly we can get through the process a lot quicker. I expect there will be a process in all future plans, but I don't expect it to be quite as long as what it was for West Virginia.And let's just all remember here, this is a big deal. I don't know that the company gets enough credit for what we're actually accomplishing, but remember, we're taking bags of trash off the curve and in a process that takes place over a few weeks, converting it into fuel that is now displacing coal. The environmental benefits of that as we mentioned in the script are enormous. It's never been done before and lets also remember, this is being done at no additional cost with no subsidy or whatnot. So to be able to accomplish what we've accomplished for the first time in the United States, I don't think should be taken lightly and I don't know that we get enough credit for it right now.

[Ronald Nash:]

Great. Well done. Thank you very much, appreciate it.

[Frank Celli:]

Thanks, Ron.

[Operator:]

Our next question comes from the line of Tate Sullivan with Maxim Group. Please proceed with your question.

[Tate Sullivan:]

Thanks for all the detail on the solid recovered fuel. And I think you mentioned securing the second contract and great comments on being out on capacity to having the demand outstrip capacity. How do the contracts work? Is it on a customer's need on a spec basis? Or is it long term contracts? How do you structure the contracts if you can get a detail there please?

[Frank Celli:]

Yes. They're slightly different. Our primary contract is with Argos, the local cement manufacturer located in West Virginia. That contract does require that we deliver the overwhelming majority of the fuel manufactured in the West Virginia plant to their site. That contract is a 10-year contract. It requires us to deliver a minimum of 35,000 tons a year of fuel, up to 50,000 tons a year of fuel. So that's the majority of the fuel generating capacity we have in West Virginia. They have actually expressed interest in clicking more than that 50,000 tonnes if we had the ability to produce it. And that, you know, still kind of remains to be seen just to put it in perspective. You'll add a 40% to 45% fuel yield. We were expecting to generate anywhere between 40,000 and 45,000 tonnes of fuel. We have a minimum commitment of the 35,000. The second contract is a bit more strategic in the sense that it's with an entity that's got multiple facilities located throughout the United States. We already knew we had all of the fuel that we can manufacture or sold locally but this really shuts us up for having an ongoing relationship with a buyer for future plans. So this is a bit more strategic.There's not a minimum delivery requirement with the second contract. It's sort of negotiated as per their need and as per what we actually have available to send to them. So it's a little bit more open-ended. It's not a put-or-pay or take-or-pay but it's a good arm's length contract at market rates. And it allows us to expand our relationships with buyers of the fuel going forward. So it was -- we entered into that deal a bit more strategically to set ourselves up for the future. And we've got multiple other parties who are also requesting that we start to deliver fuel out of Martinsburg. So right now, great problems to have but quite honestly, we don't have the production capacity in Martinsburg to fill the demand for all of those interested parties. I'll take that problem all day long. And again, I think it positions us very well for hey, this is why we need to locate a plant in upstate New York or in Pennsylvania or in New Jersey. There is a demand for this fuel.Let's remember, you know, we're not solving one problem here while we emphasize keeping waste out of landfills, and that's our primary objective, sustainable disposal solutions. You know, the emissions reductions associated with replacing some coal is not insignificant to the users as fuel. So the trend appears to be very positive and there will be ongoing and continued demand for clean-burning alternative fuels and the fact that we can produce it cost-effectively and make a margin on that while also keeping waste out of landfills, I think, again is another thing. I don't believe the market has yet fully understood the magnitude of what we're doing here but we feel like we're positioned really well, not only for West Virginia but for plants in the future.

[Tate Sullivan:]

Okay, thank you. And then the -- just to clarify. Post after the end of 2Q is when you delivered the fuel and it started being burned in furnaces yet or will that be a potential follow on announcement of [indiscernible] or has that already happened?

[Frank Celli:]

No, that fuel is being burnt in furnaces as we speak.

[Tate Sullivan:]

Okay. And did I -- my last one. Did I hear that rolling out more HEBioT facilities helps you or digest your business as well or do they -- with that did I misinterpret that link?

[Frank Celli:]

No, I think what we -- I understand how it can be a bit confusing. What we like to promote is the fact that our two technologies are complementary to each other. So just a quick example, we have customers that generate food waste, that can use our on-site digesters for the disposal of the food waste portion of their waste and then could contract with us as well to take all of their residual and remaining materials to our HEBioT facilities, which essentially provides them sort of with a turnkey one-stop shop zero waste provider. Not every customer qualifies for that but certainly, hotels, grocery stores, retail facilities that potentially generate food waste on-site could use a combination of our technologies. And in fact, we're in discussions with multiple parties that will be using a combination of our technologies. But that's not the model in every case. Sometimes they could be used together. Sometimes, they're just used independently.

[Tate Sullivan:]

Okay. One more for me, please. You mentioned market rates for the SRS. What -- how do they -- what do they fluctuate with? Does it fluctuate with the coal prices at the facility that customers currently use? Or what is the other benchmark maybe that we can look at?

[Frank Celli:]

I think unfortunately and I don't think this is what the future bears. But I think currently, I think we'll benchmark to coal, right? We're just going to be smart out as an alternative to coal. I do believe, however, that the increased regulations on emissions and sustainability should result in a market that allows us to sell our material, not at a discount to coal and maybe who knows someday at a potential premium to coal. There's a lot of work we need to do on carbon credit opportunities and whatnot. So until we got the first plan up and running we haven't had the opportunity yet to figure out okay, are there other incentives and benefits to using our products that may in fact allow us to command a premium to coal? I don't know the answer to that yet and we're certainly not projecting that. I think for the short term, we need to be thought of as benchmarking to coal.

[Tate Sullivan:]

Okay, thank you very much.

[Operator:]

Our next question comes from the line of Brian Greenstein with Ardour Capital. Please proceed with your question.

[Brian Greenstein:]

Hi, guys, congrats on the quarter. Frank, you guys mentioned margin improvement in the digestive business. Can you just give us a little more color?

[Frank Celli:]

Yes, absolutely. I mean, we've talked for a while about the launch of our revolution digesters. We developed that product line for a reason. We listened to the demand of our customers who said, hey, we want a cost-effective, reliable, low maintenance product. And we executed on that. As you know, Brian we went into development a while back on essentially replacing our legacy old eco-safe digester line that were a bit more primitive and clumsy and whatnot. We completely expected that we would achieve margin improvement in the sense that when we engineered this product, it was engineered to be a no-touch product that we weren't going to have to do a whole lot of truck rolls at and our customers would be able to rely on it day after day 24/7 and we've accomplished exactly that.We think and believe that accomplishment and that the success that we've had with the rollout of those revolution digesters, not just from our own improved financial performance but from the improved reliability and performance at our customers' locations. We believe that's part of the catalyst to sort of the growth in our pipeline and the larger unit deployment. So again, some of the things that don't really get noticed I think are, hey, we've been innovative, right? We answered the call to what our customers were asking for. It's improved our own financial performance from a margin perspective, probably equally, if not more important, right. It's been one of the key factors, I think in getting this increased interest on larger deployments and rollouts from our customer base. So it's not a surprise to us.I mean, we planned it, we engineered it that way and we executed on it so we expect that to continue to improve as we get smarter as our technology continues to be even enhanced more. And as -- certainly as we achieve more economies of scale. So when we're -- instead of putting one unit out at a time, you know one unit grew to five-unit orders, 5 units are growing to 20 unit orders, 20 unit orders seem to be moving towards 100 unit orders and hopefully, 100 unit orders end up resulting in 500 unit orders. So with those economies of scale, we'd expect we get even more improvement down the line but it's not a surprise to us, right? I mean, we planned we were going to do something. We told the market we're going to do something and we went and did it, right. And we're going to continue to do that.

[Brian Greenstein:]

Okay, great, thanks.

[Operator:]

[Operator Instructions] Our next question comes from the line of Vincent LaBarbara with Network 1 Financial. Please proceed with your question.

[Vincent LaBarbara:]

Hi, Frank. I'll give you credit because I was at the West Virginia facility before you even was operating again. I saw and I know the magnitude of it, so congratulations on producing SRF. I'd give you guys a lot of credit for that.

[Frank Celli:]

Thank you, Vincent.

[Vincent LaBarbara:]

You're welcome. But I do have another question. You mentioned something earlier in your presentation about more astringent regulation or environmental regulations from I guess states or local federal governments. Are any of those government offering any types of incentives? Or subsidize companies to become more compliant or efficient?

[Frank Celli:]

That's a great question, Vincent. We get that question a lot. Historically we've been asked by customers as well as investors often, 'hey, are there any tax benefits or subsidies or whatnot?' And it certainly feels like there should be. Historically, there hasn't been many. We've had increased regulation which we're happy to have kind of moving us in the right direction on bins [ph], on food waste, into landfills, on sustainability objectives and whatnot. Finally and more recently New York state just introduced the program called the New York State Food Waste Reduction & Diversion Reimbursement program. It's the first example that we've seen of a state-city municipality offering some type of economic benefit to customers who utilized a food waste diversion technology. It's not specific to our product of course, but it's the first example we've seen and in fact we've had -- that became just a paraphrase essentially any equipment purchased after June of last year that's used to divert food waste from landfills can qualify for up to 44% reimbursement of the cost of that equipment which is pretty substantial.One of the caveats however is that you need to actually be able to document the benefits of that piece of equipment which we feel fits perfectly with our model because as you know, we've been the ones out there pounding our chest about being the only smart disposable device on the market and can actually quantify that. We've added one customer so far, successfully be approved for the reimbursement. We've got four more that are in the application process right now that we believe will be approved. I think this is indicative of what other areas of the country will and should do.I do want to emphasize, we've always prided ourselves on the fact that our products were cost-effective without subsidies and grant. So if you read between the lines and you say, 'hey, we've got regulatory movement and regulation saying you've got to do something with food waste, you've got to be more sustainable, we've got a cost-effective product' and now we've got potentially money out there available to certain customers to utilize our product, I'd like to think that is certainly a very good opportunity for us to achieve some more scale at least in New York state for right now.But I think New York state starts it and I think it could potentially spread throughout the country. We think it's a huge catalyst for additional growth. 44% of our already-cost effective product is a big deal and I do want to remind everyone, the key here is the user to be approved does have to quantify and prove with real data that they are diverting that food waste and how they're doing it, we do hold a patent for accumulating and producing that type of data from a food waste disposal device. Not going to say we own the market, but it certainly gives us a leg up on all of our competitors.

[Vincent LaBarbara:]

Great. And Frank, can you please repeat the name of that program?

[Frank Celli:]

It's called New York State's Food Waste Reduction & Diversion Reimbursement program. Vincent, we can send you a little marketing flyer we did on it so you have access to it. Yes, it explains the program in a pretty simple way, but basically, New York state businesses that generate at least a ton which is 2,000 lbs of food a week can qualify for up to 44% reimbursement on an eligible product of which we've been deemed eligible and have had success already. It doesn't sound like a big deal, but imagine how many businesses in New York City alone generate at least a ton of food waste a week. I don't know the number, Vincent, but it's a big number, I can tell you that.

[Vincent LaBarbara:]

[Indiscernible] for the name of the report because I'm sure it is a big number. But is there any other state other than New York that you know about?

[Frank Celli:]

There's not any that I am aware of right now. There may be some stuff in the works, but this is the first real example that we've seen of it. We do think though it's going to be a trend that will continue because if these regulators want to keep food waste out of landfills, you can't use the stick all the time. You've got to use the carat sometimes. I think the carat works better and this is a great opportunity for regulators to use the carat to achieve their ultimate goals. I think it resembles solar many years back, Vincent.

[Vincent LaBarbara:]

I got it. Okay. Thank you very much, Frank.

[Frank Celli:]

Yes.

[Operator:]

Our next question comes from the line of Brad [ph] with Pioneer Capital. Please proceed with your question.

[Unidentified Analyst:]

Good morning. If the more traditional disposal companies have started to take notice of what you're doing?

[Frank Celli:]

That's a great question. The answer is absolutely yes. I can't say exactly who, but I will tell you that at our Martinsburg facility, we have begun receiving waste from a national publicly traded traditional waste company because their customer -- it actually started with their customer -- their customer heard about our facility and wanted to utilize it to achieve their own sustainability goals and that led to a relationship between us and that national hauler to where they're not only delivering the waste from that specific customer, but other customers as well. So we've got at a minimum one publicly traded company as a customer utilizing our facility. We've got a couple of other what I think you'd call municipal haulers. So not in the private sector, but towns that collect their own waste that have delivered waste to our facility. And ton the digester side, I don't know if we announced it or not, but we did announce it actually. We recently entered into a distribution agreement with another nationally publicly traded waste disposal company to potentially distribute our digester product.Yes, they are becoming aware. I can tell you from past experience, those traditional waste haulers particularly the big publicly traded ones, they are very slow to acknowledge, recognize and utilize sort of technology solutions, but I think the writings on the wall, I can safely say to you that at the Martinsburg plan, we will successfully divert 100,000 plus tons a year which to put that in people terms is 200 million lbs a year of waste from landfills owned by publicly traded waste companies in the region and that I can assure you gets their attention because at a 60% to 70% EBITDA margin on every ton of waste that comes into those landfills, that's a material impact on their cash flow and they have to pay attention. It just takes a little time to get them to really realize, 'hey, this is starting to make a difference'. They've begun to recognize us. They have started to become customers of ours and I expect those relationships to grow in the future.

[Unidentified Analyst:]

Thank you.

[Operator:]

Ladies and gentlemen we have reached the end of the question-and-answer session and I will like to turn the call back to Frank Celli for closing remarks.

[Frank Celli:]

Thank you, Operator. I just like to close in thanking everyone who participated on the call today and I look forward to speaking with you again on the next quarter's results. Thank you.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.