Enservco Corporation
Q2 2016 Earnings Call Transcript

Published: 12 Aug 2016

[Operator:]

Greetings and welcome to the Enservco Corporation 2016 Second Quarter 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. I would now like to turn the conference over to Jay Pfeiffer, from Pfeiffer High Investor Relations. Thank you, Mr. Pfeiffer. You may now begin.

[Jay Pfeiffer:]

Hello everyone and welcome to the Enservco 2016 second quarter conference call. Presenting on behalf of the company today is President and CEO, Rick Kasch; CFO, Bob Devers; and Senior VP of Field Operations, Austin Peitz. As a reminder, matters discussed during this call may include forward-looking statements that are based on management’s estimates, projections and assumptions as of today’s date and are subject to risks and uncertainties disclosed in the company’s most recent 10-K as well as other filings with the SEC. The company’s business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward-looking statements. Enservco assumes no obligation to update forward-looking statements that become untrue because of subsequent events. I’ll also point out that management’s ability to respond to questions during this call is limited by SEC Reg FD, which prohibits selective disclosure of material non-public information. A webcast replay of today’s call will be available at enservco.com after the call. In addition, a telephone replay will be available beginning approximately two hours after the call. Instructions for accessing the webcast or replay are available in today’s news release. With that, I’ll turn the call over to Rick Kasch. Rick, please go ahead.

[Rick Kasch:]

Thanks, Jay, and thank you all for joining us. For those new to the Enservco story, I would purpose my comments by pointing out that the second and third quarters have historically been and continue to be our seasonally slower offseason quarters. That said, I would like to open my remarks with the few comments on the state of the industry as we see it, Enservco’s response to the downturn and our prospects for the future. We feel our prospects are improving. Let me give you some context around this. As you are all probably aware there’s been some good news of late in that rig counts are moving in the right direction with some reports indicating that E&Ps have added rigs for the sixth straight week, the longest period of expansion in a year, 51 new rigs in all since June 24. In addition, we are seeing many of our customers adding frac crews, just in time for our heating season which should be a normal winter given that disappearance of El Niño and start of La Niña. We have also seen enough kick in the areas of completions and maintenance which Austin will address in more detail in just a minute. These positive metrics are based on rising oil and gas prices although as we’ve seen in the last couple of weeks there’s still plenty of short term volatility. Moreover a growing number of industry analysts are expecting our market to come into balance with prices stabilizing at higher levels in 2017. All of this is to say we are cautiously optimistic that we’ve seen the bottom and maybe it’s the beginning of the meaningful recovery. In the second quarter, we continue to take steps necessary to ensure Enservco emerges from the downturn as the stronger company capable of taking advantages – advantage of the many opportunities that should present themselves in the current oilfield services environment in which many of our competitors have been severely weakened or simply did not survived. We continue to take the proactive steps we mentioned in our first quarter call, managing our cost structure to bring it in line with lower revenues resulting from the reduced activity. The key to this was our ability to take cost out of the business without sacrificing the quality and consistent execution to which our customers have become a customer. And without having to ignore growth opportunities that present themselves in the current depressed environment. And one of those growth opportunities and one of the most prominent highlights of the second quarter in the past year, is our successful and continuing expansion into the Eagle Ford basin in Texas. We now have the valuable fleet of hot oilers and acid trucks servicing our small but growing number of operators. In the second quarter our hot oiling and acidizing revenue in the Eagle Ford increased 270% to $1 million as compared to 270,000 in the Q2 a year ago. During the six months the increase was 284% going from 490,000 last year to 1.9 million this year. The success of this expansion program is the highlight – excuse me – the success of this expansion program highlights the strength of our strategy of redeploying assets to basins with greater potential returns and as attribute to our team's relentless sales efforts. And remember both of these services hot oiling and acidizing are around maintenance activities which also reinforces our strategy of striking the balance in our revenue streams between drill dependent and recurring maintenance. Another growth opportunity that we discussed in our first quarter call is our HydroFLOW water treatment system. An innovative patented product that gives E&Ps and environmentally-friendly alternative to traditional, costly and cumbersome chemicals in treating bacteria in scale. We think that the E&Ps who have spent the last year are still looking at every penny they’re spending in squeezing our costs are going to be very open to enroll this technology can play and helping them operate more efficiently. We also believe the green aspect of HydroFLOW will be attractive to them due to the concerns raised by anti-fracking groups regarding injection of chemicals into the formation. We are in final field trials within international E&P customer of ours that should determine the effectiveness of treating water used in hydraulic fracking. We have also just begun a field trial outside of the oil and gas industry with the water reclamation operation similar to other successful cases – case studies performed by HydroFLOW USA. If our field trial is successful this could result in another revenue stream for this technology. We are cautiously optimistic that we will see some revenue from this product in 2016 with the strong potential for upside in the coming years. I earlier mentioned the total of this downturn has taken many oil service companies. Some competitors have been put out of business or forced into bankruptcy. Others have been severely weakened having to cherish an asset and/or personnel in order to stay in flow. While there is no question we’ve had to scale up back our workforce and term expenses we think Enservco has weathered the downturn, better than most and is well positioned for the recovery. You’ll recall that just prior to the downturn we completed a CapEx program that’s substantially doubled our fleet size. Our focus at that time was in the $75 to $100 per barrel range was to build service trucks to meet the demand from our customer throughout the country. Unfortunately, our demand fell off before we can fully utilize our fleet. And the point I’m trying to make is that we have a modern fleet of well enhanced and equipment that we estimate could represent $70 million to $80 million in annual revenue capacity once the industry recovers. In addition earlier this year we acquired a significant amount of water transfer assets and what we believe were relatively cheap prices and which in addition to expanding our service lines it will allow us to bundle these services with our frac water heating and other water management services resulting in a One Stop Shop for our customers. And we’ve had good interest in this service line but our ability to penetrate the market in this environment has been challenging due to current industry conditions that has some competitors pricing below cost. We believe that once our frac water heating season gets underway, our ability to penetrate the market will improve. The additional water transfer services to our mix could provide up to another $10 million in revenue capacity as the industry recovers. Our balance sheet at the end of the quarter remains in good shape and Bob will provide some color on this in just a moment. But first I’m going to hand it off to Austin to give you a feel for what he has seen in the field. Austin?

[Austin Peitz:]

Thanks, Rick and hello everyone. Well, certainly I’d like to come to you with some positive news about what we’re seeing out there in the field. In addition to some of the highlights Rick mentioned we are seeing benefits in the form of completions activity involving wells that are sitting behind pipes as well as new wells being drilled due to recent commodity prices beginning to recover. We expect this uptick in activity to make a positive impact on revenue beginning in the third quarter but especially during our heating season spanning through Q4 and Q1. We are also seeing an increase in well maintenance activity both with wells where maintenance was defer and with wells that has been shut in during the downturn. In recent weeks we've seen a utilization rates for acidizing and hot oil equipment increased up to 80%, 90% in the certain markets, again the financial impact of this should be felt beginning in the third quarter. Turning to our expansion program into the Eagle Ford Basin which has been a proven success for us over the last few quarters. At a time when a lot of our competitors have been contracting and/or trying away from geographical expansion, we've moved ahead aggressively to seasoned opportunities that is really paying dividends for us. To recap these efforts started with the few hot oil trucks in the single customer. Now the Eagle Ford location has gone to include 17 hot oil trucks and 3 of our 7 acidizing units and a growing number of customers including some legacy customers from other areas of operation. This location is a shining example of our strategy of redeploying assets to areas where we have a greater opportunities to drive margin and utilization. These efforts have partially offset declines in well enhancement revenue elsewhere and enable us to retain key personal during our traditionally slower second and third quarters. A few words on our HydroFLOW initiative where we're really excited about HydroFLOW's in the area of frac water treatment. This represents a potentially very large market for us. As Rick mentioned, we're currently working on a trial with a long time legacy customer which is a large worldwide E&P producer. In the first phase which is been completed, we achieved very promising results in eliminating living bacteria from water in a frac water application. We're now on the second phase which his focused on demonstrating HydroFLOW's ability to help to improve economics in the completion process. Success in these two phases would give us a compelling business case not only for this customer but for other E&P companies who are awaiting the results of our trials. Of course as we mentioned previously, we are excited about the prospectus for bundling HydroFLOW with related service offering such as our frac water heating and as well as our newly acquired water transfer capabilities. By the way HydroFLOW has many applications outside of the oil and gas industry such as waste water facilities, power plants, gas plants and many other applications that we're aggressively pursuing. We have a trial in the process right now with the large municipal waste water facility, should we be successful in penetrating these markets will have the added benefit of the new revenue stream that is not subject to the volatility of the commodity prices. A quick update on the large hauling contract we began work on in late May and was contributed about $600,000 in revenue in the second quarter. This project is on track to wrap up late in the year and contribute another $2 million in revenue over the third and fourth quarters. This project has proven very valuable in terms of retaining and keeping experienced operators working during our slower quarters. In addition, this may not be a one and done deal, the general contracts we're working for us acted to consider performing the same work on future projects. We intend to take the hard look at doing so in order to take advantage of the experience we gain from this project and possibly create another service plan and that is not definitive on the commodity prices. In closing, we are very encouraged about multiple good indications of a potential recovery and increased activity by some of our customers. As always we are working hard in the field to take care of our existing customers, track down new customers, while continuing to carefully monitor cost and reduce expenses where possible. With that I will turn it over to Bob Devers. Bob?

[Robert Devers:]

Thanks Austin and hello everyone. Let me start off with our second quarter results. Total revenue for the second quarter declined to $4.1 million as compared to $5.7 million in the same quarter last year primarily due to reduced service activity attributable to low energy prices and lower demand for our heating services due to the warm weather impacts from El Nino related weather trends. The continuation of warm weather into the second quarter shortened our heating season which traditionally has extended into April and May. The decline in water hauling services was due to lower service activity and a conscious decision to phase-out low margin work. In terms of revenue by service lines, frac water heating revenue declined $1 million from the comparable quarter last year, hot oiling declined $513,000 and water hauling was down $532,000. Partially offsetting those declines was a 19% year-over-year increase in advertising revenue helped by our expansion into the Eagle Ford, and $590,000 of incremental revenue from our dirt-hauling project. Price concessions were approximately 6.5% of revenue in Q2 as compared to 4.2% for the same quarter a year ago. Gross profit for the second quarter was a negative $800,000 versus the gross profit of $139,000 a year ago. The decline in higher margin frac water heating revenue combined with additional carrying costs related to water management division and startup costs related to the new dirt hauling contract were the primary reasons for this decline. The impact of fixed cost included in our half to get sold relative to the lower revenue base also contributed to the decline in gross profit. For the third consecutive quarter, we succeeded in reducing our corporate overhead. We've achieved a decrease of 4% or nearly $40,000 in G&A cost. This included a 28% or $122,000 reduction in corporate labor cost which was offset by increases in some other G&A expenses. Patent litigation and defense costs declined 51%, or $61,000. These improvements were offset by a $178,000, increase in depreciation and amortization expense related to the acquisition of water transfer assets earlier this year. We incurred a net loss of $2.4 million, or $0.06 per diluted share, versus a net loss of $1.6 million, or $0.04 per diluted share a year ago. Adjusted EBITDA in Q2 was a negative $1.5 million versus a negative $621,000 in the same quarter last year, reflective of the decline in higher-margin well enhanced net revenues and additional startup costs that we incurred during the quarter. Turning to our six months results, total revenue for the six months of 2016 declined 50% to $12.4 million from $24.8 million in the same period last year. As we discussed in our first quarter earnings call warm weather in our two largest heating markets combined with reduced service activity due to low energy prices were the primary reasons for our first quarter decline and the same factors carried over into our second quarter results. In terms of revenue by service line, frac water heating revenue was lower by $9.7 million year-over-year making it the main contributor to the lower total revenue. Water hauling declined $1.1 million and acidizing was down $236,000. Despite a $1.4 million year-over-year increase in hot oiling in the Eagle Ford Basin overall hot oiling revenue declined $1.6 million. Year-to-date gross profit was $737,000 down from $8 million a year ago due to decreased activity in our higher margin while it’s been in operation, warm weather impact, startup cost in our water management and dirt-hauling and the effects of lower revenue on our fixed costs basis. G&A expenses in the first half were reduced by 11%, or $233,000. Patent litigation and defense costs were down 83% or $364,000 year-over-year. These improvements were offset by a $603,000 increase in non-cash depreciation and amortization expense related to our increased fleet size and the water transfer assets. Net loss through our first six months was $3.5 million, or $0.09 per diluted share, compared to net income of $1.3 million, or $0.03 per diluted share, in the first half last year. Adjusted EBITDA for the six months was a loss of $873,000 compared to a positive $6.1 million last year. Despite the decline in profitability we still generated $1.6 million in cash from operations in the first half of 2016 compared to $12.7 million in the same period last year. Our balance sheet remains solid. As of June 30, we have working capital of $2.4 million at current ratio of 2

[Operator:]

[Operator Instructions] Our first question comes from the line of Tom Dillon with William Blair. Please proceed with your question.

[Tom Dillon:]

Hi, guys. Good morning. Your customers' behavior has been little unpredictable or sporadic over last six months. Can you talk about what you are seeing or the conversations you are having with your clients for last six weeks? How things changed there and then for the follow-up can you delineate that between different geographies? Thank you.

[Rick Kasch:]

Austin, do you want to address it, your discussions, I know we are just in the process of starting a lot of those discussions getting ready for heating season but maybe he can give a little flavor to what you're hearing.

[Austin Peitz:]

Sure Rick. So it's pretty tough out there. The thing about it is lot of - it's all it's not so much strictly driven of current the commodity price. They get a lot of the skill hung upon the current commodity price instead of what our customers particularly got hedges at. And some of the recent drilling activity they are more efficient, more so the cost - operating cost are lot lower by basin. So we are just now beginning to start discussions on frac water heating and negotiate pricing and activity. We get a lot of positive feedback by giving DJ Basin, where it looks like there is a pretty good uptick in activity in the recent 30 days and projected in a next 30 to 60 days in additional uptick in activity was some of our primary customers, which is going to be very positive impact for us. However there is still some areas such as North Dakota where it seems that the - what am I saying that urgency to complete some deferred maintenance programs are still kind of sitting on the hills a little bit not as dung hole but jump in back into it as they are in the Eagle Ford Basin which we’re seeing a lot of our upside right now. So it varies all over the board and then one of the primary heating areas for us is the Marcellus and Utica where we are in current talks right now with the lot of customers that we have done business with for many years. A lot of people are excited about the anticipation of the natural gas price recovery coming. It's pretty good uptick in activity out there which will really drive our heating season which we did not have in the Northeast last year with the mix of the warm weather and the commodity price was really suffering last year. So it's all over the board that as kind of beating a nutshell. One of the things that we are really excited about is our recent efforts that we put into that acidizing division that are tied directly to the well maintenance and bringing new or old well back into existence or increase in production and existing well that are operating. We've seen a lot of the traction in – and it's going to be redeploying and moving some additional assets to capture some additional opportunity that are coming up sooner than later.

[Tom Dillon:]

Got you.

[Rick Kasch:]

Down in the Eagle Ford for clarification.

[Tom Dillon:]

Okay. Thanks. I appreciate it.

[Operator:]

Our next question is from the line of Jeff Grampp with Northland Capital. Please proceed with your question.

[Jeff Grampp:]

Good morning, guys. On a HydroFLOW certainly sounds like you guys are getting some progress there with field trial, I am trying to get some momentum. Rick can you also maybe - can you just talk about how do we get from where we are at today with the field trials, maybe recording some meaningful revenue as we exit the year in getting into 2017?

[Rick Kasch:]

Well, what's going to happen is the process is going to be the finishing of the field trials in which this field trial that we are currently in the final one, is actually going to determine how much impact it’s going to have on completion cost, in other words the biocide used to treat for bacteria and scale. So I figure within - that should be completed within the next 30, 45 days. We should be able to determine savings amounts and then we can also determine pricing. And as often mentioned there are several companies waiting throughout the various basins from North Dakota to BJ down back in the Texas, that are waiting to see what the results of this are for all the reasons we mentioned as far as cost savings, the green effect and so forth. So, what it is going to happen is even after the trials, each of those companies are going to meet with, talk with their engineers, show them the results and so forth. So I see fourth quarter as being the first quarter in which we will potentially see revenues coming from this application. And then it’s just going to be a multiple as the acceptance by the industry of this treatment and that will create a multiple of earnings that we should be able to see happening in 2017.

[Jeff Grampp:]

Okay, great. And Rick what's the pricing front, I know maybe it's a little bit early to get a handle on what ultimately margins maybe. But do you sense maybe relative to other than maintenance services or the frac water heating, how you think the HydroFLOW margins maybe on a relative basis?

[Rick Kasch:]

Our HydroFLOW margins is going to be tough right now until we can determine what the pricing is going to be on the revenue side. As far as cost, it's mainly fixed costs of your equipment that you have out there with a few crew members to monitor and handle the process. So the margins we anticipate should be fairly strong but again until we can get the results of what economics we can do for the E&P is little bit difficult for us to look at that one.

[Jeff Grampp:]

Okay. That's fair. And then last one from me, you kind of mentioned a lot of same thing last year and rig counts up again this week, kind of it seems to be a lot of activity really focused in the Permian here, I know that's where you guys have talked off and on about getting into organically or inorganically. Is that still of interest to you guys? Is that the basin you guys are still paying attention to? And what are your kinds of thoughts on potentially getting some exposure there given - certainly seems like disproportion amount of activity is coming instead of Permian versus other basins?

[Rick Kasch:]

All right, I'll let Austin address that.

[Austin Peitz:]

Good question, Jeff. We have been putting - we been putting some efforts into West Texas, however let me clarify we've been contacted by some legacy customers and through the whole shake up through the E&P world, our customer the representatives are moving from this company to that company, to this basin to that one. We've got some contacts that have recently been relocated down in West Texas. We've made some contacts with people that have operated there for years that we've got long relationships with, so we are actively pursuing West Texas through people asking us to come and us exercise an opportunities, and we plan to hear at corporate sit down and try to build a plan and a plan of the tax for the economic side and the business approach of - the cause and effect of pulling assets out of certain markets to send them down there. So that's what we are in the process of doing right now. But we are actively seeking and pursuing opportunities for hot oiling and acidizing and water transfer in West Texas.

[Jeff Grampp:]

All right, great to hear. Thanks for time guys.

[Operator:]

Our next question is coming from the line of William Bremer with Maxim Group. Please proceed with your question.

[William Bremer:]

Good afternoon, gentlemen. Initially my question was on the HydroFLOW and just wanted to touch upon the pricing aspect. Maybe I'll ask it this way. How do your plans to go to market with this strategy. I know you mentioned bundle services but if the customer just wanted a sort of one-off and that line for direct, I'm assuming the margins, there has to be quite higher than legacy margins is that fair to say?

[Rick Kasch:]

We believe that will be, what the results are - go ahead…

[William Bremer:]

Yes, I just wondering how much capacity and may be you can give that to me in terms of either amount of deployment or may be a revenue figure. Do you currently have at this point with this product line or service?

[Rick Kasch:]

We have - I think how many units do we have -

[Robert Devers:]

…so, specific of that can be used in hydraulic fraction process right now we've got 17 units.

[Rick Kasch:]

So, question becomes in some of those as how many units do you use on each individual frac job, could be somewhere between - looks like somewhere between 1 and 3 units. So, as far as the revenue organic, I know I keeping saying it, but until we can determine what we are able to save these E&Ps its going to be difficult for us to set a price to determine revenue.

[William Bremer:]

And may be just a very macro question in terms of the budgets that are out there from the client base and what you are currently hearing from them, I'm glad you called out that pretty much near the bottom or at the bottom and looking towards a recovery. What do the clients and your customers - what are they voicing right now?

[Rick Kasch:]

Once again you know a lot of our customers are starting to hire, starting to ramp back up and build internally right now. We're seeing some of our contacts that were laid out going back to work. So, it's all says positive and it's like once again its - as we go out and start pursue opportunities and negotiate pricing for season, we’re talking to customers about their need because of the - incline of work and their added frac crews and from frac crews to work over rigs and the maintenance activity. There is a steady temperature out there is going to have a steady incline but not a huge ramp up of activity which is good and bad. So we like the big ramp up and we just like the battles however a steady incline of work it allows us to have better preparation time for them as well. So it's going to be a steady incline of activity, this is what the temperature is right now across basically all basins.

[William Bremer:]

Got you. Thank you. Thank you very much for the color gentlemen.

[Operator:]

[Operator Instructions] The new question is from the line of Bhakti Pavani with Euro Pacific. Please state your question.

[Bhakti Pavani:]

Good morning guys. This one is for you, Austin. The current fleet in Eagle Ford do you intend to increase that fleet size in the coming months or do you intend to maintain at the current level?

[Austin Peitz:]

So right now one of the things that we're excited to deem is, the seasonality aspect of the Eagle Ford Basin with the services we're providing. So if there is a seasonality curve there, that's one of the things we're weighing in conjunction with the opportunities in West Texas due to the fact that we don't have an abundant supply of hot oiling and acidizing units, however we've got some additional capacity for deployment. So I believe there is going to be some room for the year end business to add units in the Eagle Ford Basin as we add customers, who are in talks with some of the - with quite a few people that we've done no work for at this time. However the big player in the Eagle Ford so as we spread our wings to customers on these add units there and once again we’re going to take that into consideration with the opportunities that are being presented to us in West Texas and we're going to go after whatever presents the best opportunity for us.

[Bhakti Pavani:]

Fair enough. Also like you know over the past few quarters you guys have been really having competition from the pricing standpoint. With the uptick in commodity prices, do you see that pricing pressure slightly easing off or it's still the same?

[Rick Kasch:]

No, overall we're still seeing price concessions being requested. It's becoming a little less as stabilized prices. But I also would be - I guess like the CEO of Schlumberger or Halliburton as they mention as oil prices go back up, we’ll probably see service prices being able to be increased. So that’s kind of where the situation stands right now, I think.

[Bhakti Pavani:]

Okay. Just to follow-up on the HydroFLOW, you did mention that a lot of E&Ps are still waiting to see the results of the initial test, have you received any kind of indications from these E&Ps, if they would like to do the test on their own with the HydroFLOW acid or do you expect immediate sort of revenue from that line?

[Rick Kasch:]

Yes. No, we’ve got to get a mix. Once again if they are trying to push us –its proven effectiveness that they can get it for free and call it a case study, they’re going to try to ask us for that. So however, there are some people, who says with the proven results, you know, we've got one of the bigger players in DJ Basins. And once you provide us with your case study and its proven the results we’ll sign it up as and potentially be a revenue stream immediately. So this kind of -- there is a mix and then there are some areas of operation that we want to be a little bit careful. Our case study is being done in a specific basin and we want to go and do a little bit of testing on our own before we over sell and under deliver and make sure it’s going to have the same impact in other basins where the water has different contents in it. So we’re going to approach to other basin a little bit carefully, before we go on promising things that happened in Morne Basin and don’t know for sure if that will happen in another basin.

[Bhakti Pavani:]

That’s great color. Thank you. Also with regards to the initial trial with the municipal wastewater facility what kind of timeline do you think before we get the results and do you guys intend to publish the results?

[Rick Kasch:]

Yes. Good question. So we are in – we’ve just began the trial phase. We anticipate the trial phase probably to range from about 45 to 60 days. The trial phase is just to prove the effectiveness with this one potential customer. I want to elaborate on the fact that this is a proven technology in this application in many parts of the world let alone the lower 48. So we have multiple case studies proven this effectiveness on this device scale that we will be treating in this application. So I don’t --we’re not -- we don’t have any fears of it, proven the technology, but what we are signed to do is prove it to this potential customer and build a business model as far as the economics for both parties involved that make sense, with this effectiveness.

[Bhakti Pavani:]

Okay. Just a last one, what kind of the status on the lawsuit, I mean, do you expect to incur legal cost for the balance of 2016 or do you anticipate any movement with the results on that one?

[Robert Devers:]

I assume you’re referring to the patent litigation and....

[Bhakti Pavani:]

Yes.

[Robert Devers:]

Okay. So status of that is the same as it’s been for a while now. Our court cases stayed, it’s really all pending results of the appeal process of the North Dakota, where the heat on the fly is lost, the case and the patent was declared invalid, they’ve appealed that decision and its -- we just have to wait-and-see what happens there. In the mean time, we will have some legal cost that will remain into low levels that you are seeing now and that’s really the cost for monitoring what’s going on in North Dakota and any other patent movements that might result from that.

[Bhakti Pavani:]

Okay. Thank you. That’s it from my side.

[Operator:]

Thank you. At this time, I would like to turn the floor back to management for closing remarks.

[Rick Kasch:]

All right. There was one comment, we wanted to make sure that it got across to -- I think it was Bill’s question. I want to clarify that HydroFLOW is a standalone product, that doesn't need to be bundled in. It just gives us an opportunity to bundle in with other services. But it doesn’t have to be sold as part of a bundle. It will be sold as a standalone. So I want to thank everyone again for joining us today. As always we appreciate the efforts of our entire team and the support of our stockholders. We've managed to weather the storm pretty well also far and are very encouraged by growing signs of recovery. I look forward to speaking with you again following the third quarter. Stay cool out in the east coast I understand it’s getting hot out there. So appreciate it and we'll talk to you in a few months. Thank you.

[Operator:]

This concludes today's conference. Thank you for your participation. You may now disconnect your lines at this time.