Superior Drilling Products, Inc.
Q4 2018 Earnings Call Transcript

Published: 7 Mar 2019

[Operator:]

Greetings and welcome to the Superior Drilling Products Fourth Quarter and Full Year 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Deborah Pawlowski, Investor Relations. Thank you. You may begin.

[Deborah Pawlowski:]

Thanks, Rob, and hello, everyone. We certainly appreciate your time today and your interest in Superior Drilling Products. Joining me on the call are Troy Meier, our Chairman and CEO; and Chris Cashion, our Chief Financial Officer. You should have a copy of the financial results that were released before the markets opened this morning and you should also have the slides that will accompany our conversation today. You can find both of those documents on our website at www.sdpi.com. As you are aware, we may make some forward-looking statements during the formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release, the slides and the other documents filed by the Company with Securities and Exchange Commission. You can find these documents either on our website or at sec.gov. I’d like to also point out that during today’s call, we will discuss some non-GAAP measures, which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP with comparable GAAP measures in the tables accompanying the earnings release, as well as in the slide deck. So with that, I’m going to turn it over to Troy to begin. Troy?

[Troy Meier:]

Thanks, Deb. Thanks, everyone, for joining us for the fourth quarter and full year on 2018 our financial results. As you can see from our press release, we delivered a 70% revenue growth and this growth generated $4.6 million in cash. And we’ll talk about some of those things here on your slide deck. If we’re on Slide 4, you can look at we start off with a strong growth and operating performance. When you look at the expansion of the Drill-N-Ream into the market, first bullet point there, we now have over 5,000 runs in the U.S. on the Drill-N-Ream tool. It’s a tool that’s been – it’s find an acceptance very well. When we go to the numbers, you’ll see the tool deployment, the royalties and revenue that we get from the repair of the tool, and you’ll see how this tool fleet grows, what that does to that, that good reoccurring revenue. And we’re like in what we’re seeing there on that. The constant contract, contracted services that we do that’s we – that’s good from revenue. That’s the bit refurbishments that we have with Baker Hughes and that’s been solid and it continues. We continue to strengthen that relationship with them and look at other opportunities within that organization how we can support it. We established the repair facility in Abilene, Texas. As you all know, we started on that. In Q4, little bit in Q3, but really hit it in Q4, we opened our doors the first week of October in Abilene. If you look at the Drill-N-Ream fleet and the tool maintenance that goes on with that, we’ve got 70% of that fleet is now being repaired in Abilene, which is a good thing when you look at the new tool demand we’ve been putting through our facility in Vernal. So that, that capacity has been freed up in Vernal with the support of the Abilene facility. We’re like in what’s going on there. We’re able to build that fleet in the Mideast and also support DTI and their efforts of gaining more market share in the U.S. We have good solid financial performance. Again, this is where we – this is that fleet maintenance that we talk about. If you look at again the drill bit refurb, the Drill-N-Ream refubr, that’s our legacy. That’s what we’ve done for a very long time. And I feel we’re the best in the world at doing that. And you’ll start to see that as we start to generate more and more cash from this fleet and maintenance business. So we’re pleased with what’s going on there. When we look at the Mideast demand, we’re building a fleet there. We’re excited about the opportunity there. We’ve got a good inventory of tools now. We’re building up and giving support to the Mideast team. They’ve done a really good job about getting out there and talking to customers let them know what the Drill-N-Ream is. And now it’s time to start getting this inventory in the hole. And we’re excited about our opportunities there. We get a lot of requests for larger tools and what we’ve made in the past. So the fleet that we’ve built is, we’ve got the 6-inch series, we’ve got 8-inch series, we’ve got 12-inch series, but we’re getting a lot of requests for much larger tools, 16-inch, 18-inch, 22-inch. So there’s good opportunity there. And we’re looking at the economics around that. And how does that play out with the rental rates that can be charged. We’ve got to, as we establish our channels to market in the Mideast, we’re very pleased with our newest channel partner. They’ve really caught on to what the Drill-N-Ream can do for their customers. And the Drill-N-Ream is performing very well over there. And we’re excited about enhancing that relationship with that channel partner its grabbing that opportunity. We look at the Strider technology, as you all know, those of you that have been following us for awhile that’s been a thorn in my side. It’s – it was a tough project, but I really feel good about where we’re at with that now. We’ve got the smaller version, not what we called – traditionally called the coiled tubing. This smaller tool that we have running in open hole is doing a fantastic job. And the larger tools that we’ll be getting out into the market in the second half of the year, those tools are just a bigger version of this small tool that’s doing a fantastic job. We’ve got our manufacturing cost on these things figured out, our repair costs on these figured out. We look at that market. We look at that opportunity within the market. I know some investors may have been a little worried in the past that this opportunity is slipping away with the agitation type tools. But what you’ll see is that market is actually growing. We’ve seen some wonderful reports that talk about the assistance of extended reach tools and agitation tools that are allowing not just to get out on these long laterals, but to do these wells faster. And so we think there’s a great opportunity there. And we’re studying that market and where we think we’re going to fit into that space very well. And you’ll hear me bragging as the year goes on, I truly believe we have the best tool in the marketplace. When you look at the improved balance sheet that Chris is going to be talking about, we’re tackling debt, we continue to do that. As you go through that, you’ll see that, that we stay focused on our balance sheet and we’re managing that quite well. With that being said, I’m going to turn it over to Chris.

[Chris Cashion:]

Okay. Well, thank you, Troy, and hello, everyone. Let’s continue our discussion on Slide 6. Take a look at the – at our revenue. Troy mentioned that overall revenues up 17% for both revenue types, the tool revenue and the contract services revenue. When we take a look at contract services that’s the navy blue part of the bar. You see that we had a nice step up in revenue going from Q1 to Q2 2018 roughly 20% increase. And you see for Q2, Q3 and Q4 nice, steady maintenance of that increase. We execute a new agreement with Baker Hughes April 1, 2018 and we’re really pleased with what we’ve seen from a revenue perspective since that time. So that’s good solid business for us. As Troy said, that’s the legacy business. 24 years, 25 years of managing that business and when we saw it, nice increase in 2018 from the bit refurb side. With regard to tool revenue, you see a pretty choppy quarter-by-quarter chart there. The Q4 seems to be, it’s soft for us every Q4 and this is – that’s what we see here. Pretty much the same current quarter to prior year quarter, down just a tad. And that’s driven, this choppiness is driven by tool sales. And we’ll talk a little bit more about that in just a second, but then that as the Drill-N-Ream tool sales, part of what we’re saying and continue to see, we spoke to everyone about this back in November, our Drill-N-Ream tools lasting longer. And that’s a good thing. We’ve built a quality product. And it’s a – it’s holding up in the field and just doing – just a fabulous job. That does soften, some of our tools sales revenue, because the tool is lasting longer. But those tool, replacement tool sales, they’re coming. They’re just not happening as quickly as we thought. But the positive is we get continued recurring revenue through repairing those tools. So on the one hand tool sales is down a little bit. On the other hand, we’ve got nice growth in the Drill-N-Ream repair and royalty, which we’ll see on the next sheet. So let’s flip to Slide 7 and just kind of dig in a little bit to that tool revenue, a component of our business. Once again, that’s just kind of look down at the bottom and look at the chart, bottom left and we see the light blue. That’s where the tool sales are. And those tool sales at, it’s a lot like the capital goods market. These are CapEx to our customer that purchases these tools. And so there’s some volatility quarter-to-quarter, as you can see on this chart. You can see Q2 2018, $4.1 million in tool revenue. We had a little over $2 million of tool sales in that quarter. Then you see Q4, that’s a soft quarter I alluded to in tool sales, that’s in that light blue part of the chart and that’s roughly half of that $400,000 tool sales. So when – those tool sales, when we realize those then it really has a big impact on our quarterly numbers. The thing that we really, really liked is what Troy alluded to earlier and look at the navy blue part of that – those bars. That is that we call it the other related tool revenue is what we call it. That is where we have the Drill-N-Ream repair and the Drill-N-Ream royalty revenues. And that bar, that piece of our business, it’s looking a whole lot like that bit refurb piece of our business that you saw on the previous page, good solid recurring revenue for us. And you can see just how, how steady that is Q4, 2017, steady and growing I might add $1.2 million in Q4 2017, $1.8 million in Q4 2018. Good strong growth, steady growth. And then you look at the calendar year, take a look at that once again, that navy blue bar and you see that, 2018 the recurring revenue piece of our business equals the tool sale piece of our business. And then one last thing just to point out, once again that volatility around tool sales, that choppiness if you will, Q1 2019 has begun really strong for us. We’re sitting here so far this quarter $1.5 million in new tool sales. So that downward trend that you see there, it’s been reversed in Q1. And as a matter of fact that that $1.5 million through a couple of months that’s on track, if we were to continue at this rate on track to kind of look like Q2 of last year, which was our best quarter. So once again, story here, just volatility around tool sales and offsetting that volatility, each quarter goes by larger deployed fleet of tools, more repair revenue, more royalty revenue, more stability around cash flow. Let’s go to Slide 8, take a look at SG&A and in our other operating expenses, you can see that from a cost of revenue perspective, current quarter to prior year quarter, 590 basis points down, the primary driver there is in Q4 of 2018, we had our Abilene service center. We made that investment people and in Abilene and so that’s some additional infrastructure, some fixed costs that will begin to leverage from an operating perspective as we go forward. But we did put that investment in place in Q4, 2018 and so that had a slight depressive effect on our margin from a cost of revenue perspective. Look at SG&A and as we’ve said in previous meetings, we are investing in R&D and international expansion. And those two items are in that SG&A line that navy blue part of the chart. And that’s the bottom chart. So excuse me, that’s the cost of revenue. The SG&A is the light blue, $7.1 million up from $5.7 million in 2017. That’s driven by the R&D, that’s the Strider that Troy just alluded to, continued prototypes that we’re building. And just to remind everyone, as we commercialize that product, we’re doing that on a very broad basis. Looking at small tools, large tools, different kinds of drilling environments at that spells a number of prototype tools that we’re testing in the marketplace. And then of course, our expansion into the Middle East, that’s people, that’s logistics, and so that spending is up and it’s in that line as well. And Mike, go ahead and just point out that in October, 2016, we had across the board salary cuts, we reinstated those January 1, 2018. We did – we took the hard, made the hard decisions back in the depths of the market, 2015, 2016, cut a lot of things, including salaries. We reinstated those, November, excuse me, January 1, 2018. So some incremental spending in that area. Overall SG&A guidance, I mean, we were within the guidance that we’ve been telling you folks all year. Now let’s go to Slide 9, and really this is just a summary of what we’ve talked about revenue that that spikiness in revenue. Q2 really good quarter, Q4 soft, has the predictable impact on operating income and that’s what you see here. Slide 10, pretty much the same with regard to adjusted net income and adjusted EBITDA, just referenced Q2 2018 again, when we’re – when we have a great deal of tool sales. EBITDA, as you can see from the chart, 39.5% when we were little softer than that than the EBITDA reacts accordingly. But I want to focus on the calendar year number. Chart on the bottom right hand side of this page at Slide 10. You can see it in 2018, $5 million of EBITDA, we did $5 million of EBITDA on 2017, 27.2% of revenue down a bit from 2017. The emphasis here is investing in Texas service center. We invested in Middle East expansion and we invested in R&D. And in those investments, our EBITDA is staying in this 25% to 30% range, high 20%s, even with us investing and expanding the business. So we’re really, really pleased about the – about how the operating leverage that we get from some higher revenue, gives us the ability to afford these expansion move that we’re making. Now let’s go to Slide 11, and take a little more look at the solid balance sheet that Troy alluded to. We’ve done quite a bit of work on this. You can see the cash and end of the year cash has roughly doubled $2.4 million to $4.3 million. We had some capital spending $745,000, the majority of that was building some tools for the international expansion and we had some CapEx and opening up the Abilene, Texas facility. We refinanced a few things over the last few months. The Hard Rock Note was refinanced. We basically were able to take $1 million of principal payment out of 2019 and we deferred that in 2020. That gives us some more breathing room as we spread that maturity out. We also refinanced the Vernal, Utah mortgage, because that done February 15, we’ve managed to get that one done, working with the fabulous lender that we have American Bank of the North and then they’ve worked with us on that. And so we’re really pleased about extending that a couple of years. And interest rates, 7.25%, about 15 basis points higher. It was 7.1. So we’re really pleased with that refinancing. And then we also got a credit facility in place, $4.3 million credit facility. We put that in place a couple of weeks ago, closed on that deal. We have a revolver now and the financial flexibility as we grow the revenue to be able to finance that working capital. And then the next slide, Slide 12, our guidance for next year. We’re looking at $21 million to $24 million in revenue. That’s a growth that between 15% and 30% after 2018, $18.2 million, 58%, 61% gross margin. SG&A, that’s going to go up some $8 million to $9 million as we continue to develop the Strider tool. And just to give you a little idea of what we’re doing in the first half of this year, we’re doing a lot of math modeling with the third party engineering group. And then we’re got some plans that we’re going to execute April, May timeframe, where we get our tools, our big tools that Troy alluded to, get those big tools and a test well environments. And so we’re able to spend some more money in the testing program and then we’d be able to in the past. And so that’s going to lead for a few more R&D dollars in 2019. And then international, as we continued to grow and expand, we need to hire some people in the Middle East, bring some people on board, some headcount increases. And so those costs fall into that SG&A line. Depreciation and amortization, that’s going to be up a little bit. We did about $3.7 million and DNA in 2018, going up between $4 million and $4.3 million and that’s a function of those rental tools that we’re building for the Middle East. The depreciation of those tools that’s the reason for that increase the depreciation expense. Interest just under $800,000 and then CapEx, we’re spending a little bit more CapEx then what your folks are probably accustomed to for us. And we’ve been keeping CapEx that $1 million or less over the last few years, where we’re spending a little bit more $2.8 million. We’ve got more Middle East tools that we’re putting in place. And then we’ve also got a piece of equipment that we use in our bit refurbishment plants that’s – we’ve had it for 10 years. It’s needs to be replaced. So we got some replacement CapEx there. And then another piece of equipment called a turning center and that’s going to help us be a lot more efficient in our plants and our manufacturing plants with that piece of equipment. And so we’ve got a little bit of CapEx and the majority of it being the Middle East tools as we expand our business throughout the Middle East. So with that, I’m going to turn this back over to Troy to closing comments.

[Troy Meier:]

Thanks, Chris. So if you look at 2019, what we’re looking forward to. One of the things that gives me a lot of excitement as the team that we have our managers are everybody in this organization is doing a wonderful job, when we look at they’re owning their departments, they’re owning their product lines and it’s really starting to show the efficiencies and the quality that, that the teams are putting out or is incredible. And I’m excited to grow with them as we go into 2019 and started getting these high end, high quality products into other parts of the world. So 2019 is going to be a very exciting year for us. And it’s time that we perform on another product line. We get that out there. Like I said before, I think it’s going to be the best extended reach tool in the marketplace. Early indications are showing us that to be true and we’re going to really firm up the Middle East and what we’re doing over there. So there’s some wonderful opportunities. We go into 2019 and I think you’ll, you’ll see a company that performs very well. And with that said, I’m going to turn it over to some Q&A.

[Operator:]

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from John White with Roth Capital. Please proceed with your question.

[John White:]

Good morning.

[Troy Meier:]

Good morning, John.

[Chris Cashion:]

Good morning, John.

[John White:]

The guidance is impressive. Congratulations on that. And the Middle East, your first page of your press releases got a lot of Middle East related bullet points. Can you provide a little – I’m glad that’s working so well for you. Can you provide us a little more color on what’s driving that? Have you focused more marketing effort on that recently? And what countries are the primary –represent the primary activity?

[Troy Meier:]

So when we look at the Mideast, in 2018, we were really – we were looking at the market and how are our tools going to perform. Do we have the right cutters in the tool? Do we have right material on the body? It’s a different drilling environment over there. And then what we found is our tools perform very well. And the opportunity is larger than I thought it was. When you look at the whole size is over there, 12-inches is very, very common. 12-inch here in the States is the high end. I believe 12-inch will be about the medium range of tool over in the Mideast. We have a – We’ve had a team member over there. He’s our product champion, if you will. And we’re now in the time that we’re going to give him a bunch of support. He’s been over there and getting the word out, talking to the E&Ps. Over there as you know, most of this is done through national oil companies. And what the national oil companies are saying is, is this tool works and they’re requesting this tool. So we’re very excited about what goes on. But as you know, we’ve got to figure out logistics and I believe we’ve got a really good handle on that now. We’ve got a good handle on the repairability of these tools. And we’ve set up in Dubai. We’ll be looking to set up in Kuwait as well. We now can repair these tools over there. We need that for a rapid turnaround time. So it’s supporting the efforts that we’ve been doing, but we’re really focusing in right now on one country over there that, that the tool has done very well in. And we’re looking to really just mastered that, that area of that country with the Drill-N-Ream and we think we can do it.

[John White:]

Thank you. Do you want to say what country that is?

[Troy Meier:]

Well, I’ll – I can say there is a couple of countries over there. And as you know Saudi is a big one. And so it was Kuwait, and I kind of liked to leave it at that and…

[John White:]

That’s okay. I understand. So you had one marketing person in the region for all of 2018 and I’m assuming that was not the case in 2017.

[Troy Meier:]

You’re right. I mean, you’re exactly right. You all remember, we went over there is what the total introductory with Weatherford and through Weatherford. And that got a little strange. And we still have a good relationship with Weatherford and we still plan on getting the tools into the market through them. But we’ve just diversified quite a bit. And the diversification is allowing us the opportunity to get more tools in the whole at a much more rapid pace.

[John White:]

Okay, very good. Thanks very much.

[Troy Meier:]

You bet, thank you.

[Operator:]

Our next question comes from John Sturges with Oppenheimer. Please proceed with your question.

[John Sturges:]

Thank you. Nice year folks. I’m curious about the longevity of the DNR, whether there what your thinking is. Would that justify a premium or do you leave it as it is and it just comes a device that provides much better value for the end customer you make it up on the backend?

[Troy Meier:]

Well, it definitely provides a much better value for our channel partner. And we respect that. We’re glad that there’s a benefit too. When we model this out and we talked about the life of the tool being a 12 runs, and if that that now all of a sudden is getting up there to the 15, 16 runs it –what it does, John, is it just delays the tool replacement program that we thought would happen more in the third and fourth quarter of last year. It’s going to happen. And it’s – I’m glad the tools are last and like they are like Chris said, we’re getting more, more opportunities to grab that repair revenue, of course the royalty revenue, it doesn’t affect that, because it wouldn’t matter if that was a new tool or one that had 18 runs on it, we’re still going to get it. But it’s good for our channel partner. They’re able to get a better return on their investment. And we’ll be getting those new tools sales as that fleet does wear out. So as far as the benefit to the end user, the E&P companies, I mean there’s got to be one, if the cost of the tool to our channel partner is, they’re getting a better return on their investment. They can then relay some of that on to the E&P.

[John Sturges:]

All right. So then basically becomes a better marketing tool.

[Troy Meier:]

It really does.

[John Sturges:]

Okay. You had mentioned earlier last year about 60 units being targeted as potential for Mideast. Can you give us some color as to how far along that number you are or just curious?

[Troy Meier:]

No, I can tell you we’re really close to that number. We believe that we’ve got enough tools there to get us by the second quarter. But we’re looking at some of the requests for tools that we have both, I talked about the larger ones. We haven’t built any 16-inch tools or 18-inch tools. We do have the design done on this 16-inch and we feel we can really build that tool very economically. The 18-inch and 22-inch tools we haven’t played with yet, but we’re also seeing an uptick in the request for our 6-inch tools. So I think when you look at the fleet and you – if it’s hanging in and around in 60 tools, I think that’s enough to get us through Q2, but I wouldn’t be a bit surprised if we don’t start making more of the larger tools.

[Chris Cashion:]

And John, it was actually kind of it worked out pretty well with the softening in the U.S. of Drill-N-Ream tool sales, November, December timeframe that we could focus our manufacturing on wrapping this fleet up. So that kind of worked out pretty well.

[John Sturges:]

Okay, great. Two other questions actually, and then a comment if you don’t mind. One is the have you seen any impact from U.S. dollars strength? It just seems like your businesses just simply growing in spite of that.

[Chris Cashion:]

Really no negative impact, that we’re – it doesn’t, we haven’t seen it. We manage to keep growing in spite of that just as you say it.

[John Sturges:]

Okay. The other is on the, you had some production issues on Strider. You implied that you thought you had gotten through some of those. Could you add some color? I think it was on the valve in Strider on the manufacturing, that was a particularly durable material you were using and difficult to machine.

[Troy Meier:]

Correct. So the issues that we had on Strider as those of you who followed us for a while, we had a tool finished a few years back and we started running that tool in the Bakken and with good success, but when we took that tool into other markets, we found that the silicate muds that operators we’re using. In the Bakken, we were running at mostly while we were in all [indiscernible] And when we got into the silicate muds that they use in other basins, it was invading our gearbox and the tool would act like it was being turned on and off. So we had to go into a totally different design of our tool and essentially eliminate that issue, that gearbox. But the biggest, when we eliminated the issue, another issue popped up with the event that happens to create a pulse out of our tool is really unique when you look at the pressure pulse that we generate. But it’s like a water jet, if you will. And you better have a material in there that can withstand the abrasive fluids that’s traveling incredibly fast. And you’re right, we did identify a material and we worked on that material throughout 2018, and we’re extremely pleased with the results. We’re very, very excited about this material. It’s done a wonderful job for us and it makes it toward this tool now. We can – the repairability of this tool just is phenomenal. It’s – we’re over the issues of that we’ve had in that product line. I firmly believe that, like I say, we’re going to test our – we’ve got third-party validation going on right now. We’re going to be testing at Catoosa and just trying to break this tool, find out where the weak point is. But I think, we’ve got a good solid tool and I think it’ll be ready to get in the hands of the high-end channel partner here in the second half of the year.

[John Sturges:]

Terrific. That is good news. And I want to just a comment, I want thank to Chris for going to the detail in his Q&A and the progression of what you were doing with the level of SG&A. I thought that provided very good insight. So thank you for doing it.

[Troy Meier:]

Thank you, John.

[Operator:]

[Operator Instructions] Our next question comes from John Bair with Ascend Wealth Advisors. Please proceed with your question.

[John Bair:]

Good afternoon here. Good morning to you folks. How are you? Good. I’m doing fine. I got two questions for you. One, relates recent announcement about the patent infringement suit and my question is whether or not that filing were you able to prevent the bill or staple, however it’s pronounced from using or selling product that you feel is infringing on your patent, your technology?

[Troy Meier:]

Well, what we did John is, we did not give them a cease and desist, but what we said is we’re going to file suit. We believe that you are violating patent and we’re willing to sit down and explain to you where that violation is. But if that doesn’t take place, we will move forward on a suit and protect this and protect our patents.

[John Bair:]

Okay. And how would you characterize their response to that?

[Troy Meier:]

Well, I’m not supposed to say anything, because it’s an ongoing suit. I’m going to be really careful on what I say. So that’s – I really can’t say same much.

[John Bair:]

Okay. Let me, let me rephrase that. So is there a time, deadline so to speak, when a response is needed or required before you would proceed?

[Troy Meier:]

Yes, there is.

[John Bair:]

Are you able to…

[Deborah Pawlowski:]

John, we’re not going into that lawsuit any further. Thank you.

[John Bair:]

Fair enough. Okay. My second question relates to the domestic outlook, and given that a lot of E&P companies of various sizes have announced the generally speaking of moderating CapEx. How does that play into your outlook as far as it impacting, say, tool sales versus rentals? Would it be more beneficial to you on the rental side there or what’s your outlook there?

[Chris Cashion:]

So on the domestic side, as you know, we sell our tools to DTI and they are the domestic provider of the Drill-N-Ream tool. So and there, they rent the tool. So everything we do is, we sell the tools to DTI and DTI has a fleet that they go out and rent. As far as, some pullback on spending from the E&Ps, I can tell you that, we’re on over 50% of the top 50 operators in North America. So we’re in – we’ve got some very good E&Ps that are dialed into our tool and we believe that there’s going to be good growth, good – we’re still going to see steady market penetration through throughout 2019.

[John Bair:]

Okay. That sounds encouraging. So thank you for taking my questions.

[Chris Cashion:]

Thank you.

[Operator:]

Our next question is from Matt Reiner with Adirondack Funds. Please proceed with your question.

[Matt Reiner:]

Hi, guys. Can you, as far as, the fourth quarter the bit of the softness, do you have any evidence or indication or suggestion that it could any of it have been related to this infringed product from stable or whoever that company is?

[Troy Meier:]

No, no, not at all.

[Matt Reiner:]

Okay. That was the main question I had. Thank you.

[Operator:]

There are no further questions at this time. I’d like to turn the call back to Troy Meier for closing comments.

[Troy Meier:]

Again, thanks everyone for joining us. We’re excited to roll through 2019. We’ve got some exciting stuff that should start to payoff. You know, we’ve told you that we were investing in Q4. We invested to get a springboard into 2019 and I think we’re seeing that. And stay tuned, I think you’re going to see some good things coming.

[Operator:]

This concludes today’s conference. You may disconnect your lines at this time and thank you for your participation.