Chesapeake Utilities Corporation (NYSE:CPK) Q4 2022 Earnings Call Transcript

Chesapeake Utilities Corporation (NYSE:CPK) Q4 2022 Earnings Call Transcript February 26, 2023

Operator: Good day, everyone, and welcome to the Chesapeake Utilities Fourth Quarter and Full Year 2022 Earnings Conference Call. . I would now like to turn the call over to Alex Whitelam, Head of Investor Relations. Please go ahead.

Alex Whitelam: Thank you, and good morning, everyone. We appreciate you joining today as we highlight Chesapeake Utilities Fourth Quarter and Full Year Results for 2022. As you saw in our press release issued yesterday, the company finished the year with strong financial results despite the sweeping changes in the macroeconomic environment. Given our 2022 results and positive outlook, we increased our EPS and capital expenditures guidance, which continues our long-proven track record of delivering top-level performance. As shown on Slide 2, participating with me on the call today are Jeff Householder, President and Chief Executive Officer; Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary; and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer.

We also have other members of our management team joining us virtually. Today’s presentation can be accessed on our website under the Investors page and Events and Presentation subsection. After our prepared remarks, we will open the call up for questions. Moving to Slide 3. I’d like to remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The safe harbor for forward-looking statements section of the company’s 2022 Form 10-K provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on non-GAAP adjusted gross margin and has provided the appropriate disclosures in accordance with the SEC’s Regulation G.

A reconciliation of GAAP gross margin to non-GAAP adjusted gross margin is provided in the appendix of this presentation and in our earnings release. Now I’ll turn the call over to Jeff to provide some opening remarks on the company’s financial results, including the key drivers of our record performance. Jeff?

Jeff Householder: Thank you, Alex. Good morning, and thank you for joining our call today. To start on Slide 4. I’d like to thank and congratulate all of my colleagues for another record year at Chesapeake Utilities. The dedication and hard work of our employees is the backbone of our success. In 2022, we hit a number of important and impressive milestones, not the least of which was the achievement of our 16th consecutive year with increased earnings, an achievement that very few companies are forced on us to accomplish. For the year, we reported earnings per share of $5.04, which was an increase of 6.6% compared to 2021. This level of earnings growth was the result of more than $37 million of incremental adjusted gross margin and continued expense management throughout the year.

Our margin growth was largely driven by our recent acquisitions, transmission service expansions, pipeline replacement programs and strong natural gas distribution customer growth in both our Delmarva and Florida service territories. They also benefited from increased margins and demand for services in our unregulated businesses. We took important steps throughout the year to mitigate higher costs associated with increased interest rates and the inflationary environment. Beth will talk about this in a bit, but I’d like to again thank all our colleagues who work hard to generate a record level of margin growth while managing expenses across our businesses. A great job by all. 2022 was our 62nd consecutive year of paying quarterly dividends. Our track record of paying increased dividends annually now stands at 19 consecutive years.

Our strong conviction to support dividend growth through earnings growth continues to provide long-term return upside for our investors. Our 2022 capital investment level was lower than originally anticipated. For the year, we deployed $141 million in capital expenditures. As we mentioned in our second quarter call, regulatory and supply chain delays impacted our ability to complete projects during the year. That said, and let me reiterate this point, our project delays were simply timing issues. The delayed projects we expected to complete in 2022 are now scheduled for completion in 2023 and approximately $40 million of capital expenditures that were planned for last year will shift to 2023. As an example of one of these projects, we recently received FERC approval to install an additional compressor on our Eastern Shore natural gas transmission system in Delaware.

The project was originally slated to go in service late in 2022. The final FERC approval was delayed until December of last year. The compressor will support additional base and peak load capacity to meet the growing customer base on our Delmarva gas distribution systems, and we expect to have the compressor in service by the end of this year. The Eastern Shore Compressor Project is just one example of the investments we’re making to serve customer growth across our service territory. I’ll dig into the customer demand for gas service a bit more in a minute, but I’ll host it for the year. We saw residential natural gas customers increased by 8,400, a 5% increase over 2021. Our propane business continued to grow with the addition of over 20,000 new customers acquired in two propane acquisitions during the year in North Carolina and Florida.

We also continued to advance our interest in sustainable energy through investments in renewable natural gas and the testing of a natural gas and hydrogen fuel blend. In our eight flag CHP facility, we have a second phase hydrogen test at eight flags scheduled for May of this year. So as we look at over 2023, we have significant confidence in our ability to deploy growth capital. As Alex mentioned, we have increased our earnings and capital expenditure guidance, which speaks to the confidence we have in Chesapeake’s growth over the long term. We’ll talk about this in greater detail later in the presentation. With that, let me turn to Slide 5 to cover some of our recently announced sustainable energy projects across our service territory. We continue to identify opportunities to increase our sustainable energy footprint, which is one of our 5 platforms for growth.

Let me highlight a few of our recent projects. As we announced in our last call, we recently acquired Planet Found Energy Development. Planet Found provides an operable poultry-based waste to energy test facility on Maryland’s eastern shore. The employees technology patents and operating expertise will prove valuable to Chesapeake as we continue to assess opportunities to invest in poultry waste RNG projects. We also acquired the opportunity to continue development of an RNG facility in Maryland, partially supported by a $2 million grant from the state of Maryland in Davenport, Florida. We’re in the process of constructing a 2.2-mile pipeline that will connect our natural gas distribution system to a compressed natural gas vehicle fueling station owned and operated by clean energy fables as a cleaner burning fuel Utilization of CNG fueled fleet vehicles is helping customers achieve their sustainability goals, and this station also has the ability to receive renewable natural gas in U Leaf Florida not far from the office where we’re sitting this morning.

We recently completed construction of an alternative fuel injection point. It’s the first interconnection point to accept RNG into our Florida distribution system and one of the first in the state. We now have the ability to efficiently receive CNG, LNG and RNG into our Northeast Florida system. Turning Slide 6, we were excited to announce this week the commencement of construction on our first full scale RNG production facility at the Full Circle Dairy Farm in Madison County, Florida. The full Circle Dairy project is an important component of our growing set of solutions to bring renewable natural gas to market. Located in the Suwanee River drainage basin in north central Florida, we’ll build our facility adjacent to full Circle Dairy’s farm, which is home to more than 5,000 dairy cows.

Manure from the farm will be transported to our anaerobic digester and converted to more than a hundred thousand deck OFMs of pipeline quality renewable natural gas per year. Initially, our Marlin gas service compressed natural gas trailers will transport the r g to our Yuli Florida RNG injection point, and we’re evaluating several offtake options to market the green attribute of the dairy produced RNG. The project is anticipated to capture and redirect more than 1100 metric tons of methane per year, which is the equivalent of 27,900 metric tons of CO2 equivalent. Another way to look at it is the emission reduction is equivalent to powering 3,500 homes per year. As we’ve said in the past, these types of projects take quite a bit to get off the ground, and our team has done an excellent job developing expertise in both RNG production and marketing.

We’re pleased with the current progress on the dairy project, the acquisition of Planet found, as well as our first RNG pipeline project in Ohio, and we have a number of additional r g projects in the pipeline and we’re excited for what lies ahead for our sustainable energy platform. Beyond these sustainability initiatives, we have further platforms for growth and let me touch briefly on the other four. As shown on slide seven, as we traded all throughout the year, we continued to experience significant organic growth in our natural gas distribution businesses across both our Delmarva and Florida service territory. This high level of organic growth continued in the fourth quarter where we saw an increase of 5.7% on Delmarva and 4.2% in Florida.

These levels continue to be well above the national average. The consistency of our growth despite rising mortgage rates is a testament to the highly attractive nature of our service territories, especially along the Delaware beaches and across much of Florida, as well as our longstanding relationships with key developers, uh, mortgage rates have settled a bit as of late. We remain cognizant that customer behavior could fluctuate in the future given the dynamic state of the housing market. That said, we see sustained demand over the long term as our builders continue to report strong backlogs. Additionally, we are constantly reassured that natural gas and propane remain the energy sources of choice for home buyers throughout our service areas.

As we’ve discussed, the high levels of customer growth we’re experiencing in our distribution business also drives the need for additional capacity in our transmission systems. I mentioned earlier that we recently made headway with a number of projects including the fork approval for the Eastern Shore Southern Expansion Compressor Edition. Also recently announced the expansion of our Peninsula Pipeline transmission system to support new phases of development in the wildlife community in Yulee Florida. These projects and others will deliver a significant marketing growth for 2023 and beyond. We’ll also continue to drive significant growth in our propane business. During the before we completed the acquisition of Hernando Gas, which expands our service territory in the Tampa, Florida area.

Fernando was the sixth propane acquisition we’ve completed in the last 5 years hoping continues to drive strong performance for the company and remains a core component of our growth strategy. We serve thousands of customers on propane that are beyond the reach of natural gas systems. In 2022, our recent acquisitions of diversified Davenport Energy Silo, city Propane Division and Hernando Gas contributed more than 10 million in incremental adjusted gross margin. By expanding our service territory, we’re also able to expand the use of auto gas, a cleaner burning fuel use for local schools, public transportation and commercial customers to achieve lower emissions and cost saving. Propane is a highly desirable energy source in the communities we serve.

Marlin gas services also continues to drive solid performance for Chesapeake. 2022 is another record year of margin product production at Marlin. Despite market challenges including increased transportation costs and difficulties recruiting the additional skill transport drivers and operators needed to serve our growing business, we increased adjusted gross margin for the year by 2.8 million. At Marlin. We remain pleased with the opportunities we have on the horizon to expand Marlin’s services, especially as it relates to supporting the sustainable energy market. With that, I’ll turn the call over to Beth to discuss our results in more details.

Beth Cooper: Thank you, Jeff, and good morning, everyone. I’d also like to congratulate and acknowledge the team for an outstanding year. Achieving our success would not be possible without the incredible work of our talented workforce. Let me provide some additional details on our recent performance. As you’ll see on slide 8, diluted earnings per share were $5 and 4 cents for the year, an increase of 6.6% over 2021. More specifically, some of the key margin drivers for the year included contributions from the acquisitions of Diversified Energy, Davenport, Fernando Gas and Theia meter station, continued infrastructure expansions and strong customer organic growth in our own natural gas distribution businesses. Also, additional growth from the various regulated infrastructure programs and recovery mechanisms in our Florida, Elton and Eastern Shore business units.

We achieved higher margins per gallon in our legacy propane businesses and there was increased demand for Marlin CNG, RNG and LNG services and finally increased consumption in our natural gas distribution protein and aspire energy businesses. On slide nine, our financial summary shows adjusted gross margin increased 14.1 million and $37.2 million for the fourth quarter and full year respectively. Operating income in the quarter increased an impressive 16.6% over last year’s fourth quarter, and for the year, operating income was up 9% compared to 2021. While interest cost increased over 21% year over year, Chesapeake still delivered its six-piece consecutive year of increased earnings and at a pace of 6.6%. On slide 10, let me walk through the key drivers of our approximate 15% earnings growth in the quarter.

First, we recognize a penny gain from interest received from a federal income tax refund. Contributions from our recent acquisitions generated an incremental $0.13 in earnings for the quarter. Our poor businesses delivered additional margin contributions that increased earnings by $0.39 per share. This includes higher adjusted growth margin from transmission expansion projects, natural gas distribution, organic growth, increased margins from our CNG, RNG and LNG services, higher performance from our propane and aspire operations along with additional income from our regulated infrastructure programs and recovery mechanisms. Operating expenses tied to the propane acquisitions represented 10 cents. As a reminder, we have been deliberate in our spending to align the operating protocols of these acquisitions closer to Chesapeake’s operating and safety standards in our core businesses.

Higher expenses drove a $0.12 impact, which speaks to our team’s ability to manage costs across the business, higher depreciation, amortization and property tax costs associated with new capital investments were a $0.05 headwind. Finally, interest and other changes were a significant $0.07 negative impact to earnings for the quarter. On slide 11, we portray a similar bridge, so I won’t walk through all the details but would like to point out that non-recurring items in 2021 and 2022 netted to a $0.04 decline to EPS for the year. We would also like to remind everyone that these non-recurring items should be considered when evaluating the out quarters through 2023. I’d also like to highlight that the incremental growth from our acquisitions and our core businesses continued to drive significant earnings growth while higher interest and other expenses weighed on the year’s performance.

Before we jump to our segment results, I’d also like to point our analysts and investors to a slide we added in the appendix that outlines the seasonality of our earnings from quarter to quarter over the last 5 years. Moving to those next two slides, let me touch on Chesapeake Utilities operating segments. On slide 12, you’ll see adjusted gross margin for the regulated energy segment was up 8.1% for the quarter and 6.7% for 2022. Operating income increased an impressive 13.8% for the fourth quarter and 8.6% for the year. The full year 2021 operating income increase included a 2.5 million reduction in other operating expenses resulting from regulatory deferral of certain costs associated with the COVID 19 pandemic. Absent this benefit in 2021, 2022 operating income actually increased by 11.7 million or over 11% compared to 2021.

This growth was primarily driven by some of the same factors We’ve already talked about those being pipeline expansions in our transmission business, organic growth, and our natural gas distribution systems, incremental contributions from our various infrastructure programs, 4 months of interim rates associated with the Florida natural gas base rate proceeding and finally, contributions from the Escambia meter station acquisition. Turning to slide 13 are unregulated energy segment drove exceptionally strong performance with adjusted gross margin increasing by 26.6% in the fourth quarter and 18.1% for 2022. Additionally, our unregulated businesses delivered a 34% year over year increase in operating income for the fourth quarter and a 12% increase over 2021.

This strong performance was driven primarily by contributions from those recently completed propane acquisitions, again are increased margins for our propane distribution business. Also, increased demand from Marlin CNG, RNG and LNG services and again finally the improved performance at Aspire Energy. On slide 14, I’ll provide some highlights of our strong balance sheet position. As we discussed on our last call, we announced our commitment to issue 80 million of 15 year senior notes to Prudential with an average life of 10 years and at a coupon of 5.43%. The notes will be issued in March. Additionally, we also entered into a three-year interest rate swap agreement for $50 million of our short-term debt at a fixed rate of 3.98% with current sofa rates north of the fixed rate, the swap is mitigating the impacts of rising interest rates.

Additionally, in the fourth quarter, we funded our planet found acquisition with the green sub limit of our short-term facility for the year. Interest expense was an incremental 4.2 million over 2021. Additionally, as we look at the forward curve, we expect interest rates to remain elevated throughout 2023 and like 2022. We’ll manage these interest rate pressures and will continue to take appropriate steps to overcome these impacts through other mitigating strategies including cost management, alternative financing options, and regulatory mechanisms. At year end, total capitalization totaled approximately 1.6 billion. This included 50.9% of stockholders equity, which is now 833 million, and within our target capital range, 35.4% of long term debt at an average fixed rate of 3.38% and short term debt, which decreased from 222 million to 202 million from 2021 to 2022, again with 50 million attributable to the long-term debt financing completed in March of 2022.

We also recently executed amendments where the two outstanding long-term debt shelf agreements providing us with additional capacity to fund our future capital investments. As a result of the actions we took throughout the year and thus far into 2023, our balance sheet remains strong and Chesapeake remains well positioned to support our expanded capital expenditure guidance, which we’ll discuss in just a moment. These capital investments are the drivers of our long-term earnings growth and our long track record of delivering increased shareholder value. Moving to slide 15, we highlight the pipeline expansions, CNG, LNG and RNG transportation projects, acquisitions, and strategic regulatory initiatives that will drive our growth through 2023 and 2024.

As always, we remind you that this table does not include organic growth and it is not indicative of all the projects that we are evaluating and pursuing. As Jeff mentioned, our pipeline of growth opportunities continues to expand these projects and others not announced yet are poised to deliver higher margin growth across our businesses. Additionally, opportunities like the full circle Dairy RNG facility, planet Sound, and other sustainable investments, we continue to pursue, support the energy transition, and provide a path for long-term sustainable growth. We’re excited with the opportunities we see on the horizon and look forward to bringing these projects to market. Jim will cover this in more detail, but given the level of visibility we have with the Florida rate case, we have included our associated adjusted gross margin expectations in 2023 and 2024 in addition to the adjusted gross margin contribution we recorded in 2022 from interim rates.

Final approval is expected in mid-March, and again, Jim will discuss in just a few minutes combine these initiatives added 25.4 million in 2022 and are expected to add more than 21 million in 2023 and approximately 7.7 million in additional margin in 2024. As a reminder, as new projects or initiatives are announced or finalized, we will add them to this table. Moving to slide 16, we highlight our key pipeline expansion projects, especially the increased level of activity planned for 2023 with an investment of approximately 151 million. These projects are expected to contribute more than 23 million in adjusted gross margin per year once complete. With that, I would like to finish by saying that we are pleased with our results for the fourth quarter, which capped off another record year for the company.

We remain well positioned to maintain our long-running track record of industry-leading performance. Given our strong organic growth, our pipeline of opportunities to expand our business, our favorable regulatory relationships, and our talented workforce, we will continue to work hard as we always do, to drive long-term sustainable success for our stakeholders. I’ll now pass the call to Jim Moriarty to discuss our regulatory and ESG updates. Jim?

Jim Moriarty: Thank you, Beth, and good morning. It is good to be with you all. On Slide 17 and 18 regulatory initiatives, including details on the natural gas base rate case proceeding in Florida. On January 21, 2023, the Florida PSC approved of approximately $171.2 million for our 4 Florida gas units, which will now be consolidated. This approval included a common equity return of 10.25%. In addition to the incremental $17.2 million, approximately $19.9 million of adjusted gross margin formerly recovered through the gas reliability infrastructure program surcharge will be incorporated into base rates. The new rates are expected to be finalized in mid-March, following the PSB vote on Tuesday and will be implemented for all meter readings beginning March 1, 2023.

Additionally, Florida Public Utilities storm protection plan and storm protection plan cost recovery mechanisms were approved in the fourth quarter of 2022. These plans allow for the recovery of investments to further protect our electric system in the event of a storm and prevent loss of service. We expect approximately $1.1 million in adjusted gross margin associated with these plans for 2023, $2.1 million in 2024 and continued investment going forward. As mentioned, SKU is nearing completion of its gas reliability infrastructure program, which began in 2012. Through the end of 2022, we have invested more than $200 million to replace approximately 353 miles of qualified distribution mains, increasing the safety and reliability of our systems for many Floridians.

In Elk in Maryland, we continue to invest in the systems integrity by upgrading the adamant into service towards the end of 2021 and going forward, we expect the project will generate $400,000 in adjusted gross margin for 2023 and beyond. Finally, our Eastern Shore natural gas interstate transmission unit has authority to recover capital costs associated with mandated highway and railroad relocation projects, along with FINSA required safety upgrades. We expect that this program will generate $2.8 million in additional adjusted gross margin in 2023 and 2024. Turning to Slide 19. I too would like to express my sincere appreciation and gratitude to the Chesapeake team. Our performance in 2022 clearly exemplifies the strong culture here at Chesapeake.

Throughout the year, we took numerous steps to enhance our employee engagement. One example of these initiatives was the implementation of our new learning management system called the Grove. With this new LMS, we have streamlined our professional development and training platforms. The system includes virtual training, leadership curriculum and elective course offerings on all on one platform. Additionally, we unveiled our Chesapeake total wellness program, which provides employees with a resource for their health and well-being. The voluntary program encourages employees to engage in fitness challenges and access wellness content that is available any time at their fingertips. These efforts and more are driving continued high levels of employee engagement, which empowers our award-winning company culture.

Most recently, Chesapeake was recognized and named a 2023 Top Workplaces USA award recipient for midsized companies. This represents the third consecutive year we have received this high honor. The top workplace is U.S.A. sell prioritize a people’s employees of voice. More than 42,000 organizations were invited to participate in the top workplaces USA survey being based on employee feedback. This recognition is very meaningful to each and every leader within the company. Receiving this award speaks to our strong culture which is carried by each of our employees and I’d like to thank everyone across the organization who make us so successful. Referring to Slide 20. I also would like to highlight our commitment to the community we serve. We’d made a significant stride in 2022 to advance our community engagement strategy with a focus on safety and health, community development, education and environmental stewardship, we made approximately $850,000 in charitable contributions and community sponsorship.

Thank you to Chesapeake employees for the generosity and their commitment making our community a better place to work and live. With that, it’s a great to be with you all today. I will now turn back to call to Jeff for some closing comments.

Jeff Householder: Given our strong performance in 2022, the projects in our pipeline of opportunities and our overall outlook for growth, we’ve increased our capital investment and earnings expectations. Let me begin with capital expenditures on Slide 21, where we show our historical capital expenditures going since 2022, impacted our ability to deploy capital. However, we see $40 million of investments shifting into 2023. Therefore, we expect approximately $200 million to $230 million of total capital investment this year. You may also recall that we do not include any acquisitions in this guidance range. So any potential deals closed in 2023 would be additive, and we would adjust our guidance accordingly. On Slide 22, given the $369 million we have invested in 2021 and 2022, we’ve updated our long-term capital expenditures range to $900 million to $1.1 billion for the 2021 through 2025 period.

This new range indicates a $125 million increase at midpoint compared to our previous range of $750 million to $1 billion. Turning to Slide 23, let me provide our updated EPS guidance. In 2025, we now expect to deliver diluted earnings per share in the range of $6.15 to $6.35. This is an increase from our previous guidance range of $6.05 to $6.25. Our new range represents a compound annual growth rate of 9.9% to 10.3% over the 8-year period from 2017 through 2025. To close on Slide 24, 2022 was another record year for Chesapeake Utilities. We’re pleased with our performance, and we remain well positioned to deliver strong financial performance in 2023 and beyond. Our proven strategy and business model, along with the strength of our balance sheet, paved the way for a bright future, one that allows us to expand our regulated utilities and our highly complementary unregulated businesses.

We’re also excited with the opportunities we see to advance the sustainability of the communities we serve and continue our track record of top quartile financial performance. And with that, Alex, why don’t we open it up for questions.

Alex Whitelam: Thanks, Jeff. Todd, please open the line.

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Q&A Session

Operator: . Our first question will come from Chris Ellinghaus with Siebert Williams Shank.

Chris Ellinghaus : What can we expect from RNG efforts in the next 12 months or so given your acquisition and your new project, should we be expecting additional news out of that area?

Jeff Householder: Well, I would hope so. We are fairly focused right now, as you might imagine, on the Circle Dairy project that we’ve announced and I think later this afternoon. In fact, we’re having a ground breaking over on that site. And so we’ll be working pretty hard to get that under construction and up and running the early part of next year. And along with that, we continue to look for opportunities to engage our Marlin Gas Services business and transporting R&D, including deliveries from that dairy into our new interconnection point in Uli, Florida. And beyond that, we obviously bought the Planet Found assets last year with the notion that we would bring in additional technical expertise for poultry waste. And so we’re continuing to pursue that.

So there are, I think, a number of opportunities for pipeline development that would support delivery of RNG into the market area, opportunities for Marlin to transport RNG. We’re certainly going to build the and gas processor at Full Circle Dairy. And then we continue down the path to take a very hard look at poultry-related waste energy projects on the Delmarva in Florida and a couple of other states, certainly in Ohio. So I think you’ll see us actively look for projects. We’re not running out trying to buy the first thing that we see. Obviously, that hasn’t been our course of action. We’re pretty deliberate about this stuff. We are fairly conservative in our view of these projects, and we’re looking for things that not only support an environmental objective, but they also are profitable for our shareholders.

So we’re carefully exploring a lot of opportunities.

Chris Ellinghaus : Okay. Great. The increase in the guidance, was there anything specific related to that? Or is that just increasing confidence overall?

Beth Cooper: It Chris is both, really. I mean, there’s multiple projects that were underway. And then as you’re familiar, we have a strategic planning process that we undertake every year looking at the various projects across our enterprise. And so as we’ve recently come out of our kind of last strategic planning session, looking at projects, we had right into the next one. And so it gave us an opportunity to evaluate where we thought the projects that are underway and those that are going to start to go into the queue where those would likely land in regards to CapEx and earnings. And that was really the impetus to raise at $0.10, both at the low and high end.

Chris Ellinghaus : Okay. And as far as the supply chain goes, do you feel like the issues that affected 2022 are behind you and aren’t likely to affect the next few years of capital?

Jeff Householder: I’d like to think that that’s the case. It was interesting, a lot of the supply chain issues that ultimately impacted some of our projects were our supply chain issues. It wasn’t that we couldn’t get pipe or meters or fittings or anything like that. We were seeing our customers or potential customers having difficulties accessing CNG vehicles, for example. So the same type of chip issues and other supply chain issues that were affecting vehicles across the globe, we’re also affecting the delivery of vehicles that we were poised to fuel. And so some of the margins, for example, that we were presuming would show up, didn’t show up because they couldn’t get the vehicles. And so you’re beginning to see that clear up as we’re seeing it throughout the vehicle markets outside of CNG.