Unidentified Analyst : Hi, good afternoon. First of all, thank you very much for a lot more clarity and transparency that you have provided on this call. My question is more on the CO2 market and the other adjacent verticals that you guys have. Can you kind of give us a better sense of what the regulations are and how required? Is it to for the refrigeration and potentially HVAC to switch to CO2? And maybe if you can also comment, given the price increases in energy how have the economics changed? Just to so we can compare how economic it is for the industry to switch into these new technologies given how economical it was for the water to switch into reverse osmosis and using our PX exchangers? And then I have a second question and that’s your cash has increased and you have purchased stock repurchase stock higher than this and if there is a specific reason why you wouldn’t do it now. Thank you.
Joshua Ballard: Paul, I’ll start with the easier one and then I’ll hand it over to David for the other question. On the buyback again it’s something we’re certainly discussing. So I’m not saying it’s off the table Pavel, but it’s — we need to make some decisions for next year. There’s been a lot of changes here recently. And we’ll certainly be returning to those discussions with the Board. But clearly if we have extra cash we’re not going to use then we ought to give it back right? So that’s something we’ll be reviewing regularly. We’re always looking for the best returns for investments and for our shareholders and that’s when we look at as well. And for the CO2 question I’ll hand it over to David.
David Moon: Yes. This is David Moon. Just on the regulatory environment. So as you would know in Europe F-gas regulation, which was passed by the EU has been in place now for a number of years. And so the ultimate goal for F-gas is to reduce traditional refrigerant HFCs reduced them by 80% from their 2014 base levels. And that transition is well underway. And so in Europe, we’ve got roughly 60,000 CO2, installations already adding 10,000 every year. And so as you would know not only is CO2, a much more ozone-friendly, much more environmentally friendly refrigerant that’s also a much more efficient refrigerant. And so we’re getting help by regulation in the EU. We have been getting help in the EU. And now that it’s an established technology it’s — we’re no longer having to push.
There’s a lot of pull already. And so where we come in as energy prices rise in Europe and as heat continues to get hotter this is where our PX G comes in, because we are best when refrigeration systems are working their hardest. And they work their hardest when it’s hot outside. And so what the PX G does is it improves energy efficiency heat transfer. And so this is a perfect application at the right time for our PX G and it’s a minimal cost. And the payback is a very good story. And so the brownfield market in Europe is what we — that’s our near-term opportunity and that’s what we’re really working hard on. In the US, it’s a bit of a different story. So the transition from HFC to CO2 has really just started. And so the EPA just passed some final rulemaking last month.
And the target in the US will be a 70% reduction in HFCs by 2029. So the curve is steeper getting started later but the curve is steeper. And so what — there’s roughly 1,500 CO2 installations in the US today and that’s going to increase dramatically by 2029. And so the opportunity for us is going to be greenfield. And by the way, it continues to get hotter in the US more days that are above a certain ambient temperature where again PX G is perfectly suited for. So the timing of regulatory action the fact that the planet gets hotter it plays right into our PX G story and a really, really good payback story. And so more to comment, I get a chance to deep dive into the CO2 story in our strategy, but we’ve got a very, very good start.
Unidentified Analyst: So to summarize it sounds like this is not a luxury type of a thing for these companies. This is an absolute necessity because there will be some kind of penalties if they do not decrease their emissions?
David Moon: Yeah. The bottom line is HFCs will just will not be available over the course of the next six to seven years. And where they are available the price will be astronomical. That’s what’s happened in the European market. And so it forces large supermarkets, large cold storage facilities food processors to completely rethink their refrigeration infrastructure. And that’s what’s already happened in the US, in Europe. And so it’s going to play out the same in Europe. And so for Europe it’s our opportunity that there’s a brownfield market already and it continues to get hotter. In the US, it’s going to be the greenfield opportunity. And by the way it continues to get hotter. And this plays into the strength of the PX. And we’re early days in our margin into the CO2 refrigeration market.
But we are already winning industry awards. We’re getting a lot of talk and we’ll have a solid 50 — at least 50 installations next year with the premier retailers in Europe and US and it’s just a jumping off point into 2025 and 2026.
Unidentified Analyst: Right. So if I may one more. In terms of reliability that’s huge consideration when you have a freezer full of goods, right? You have been testing of the PX Exchanger in the CO2 market for a while now. When do you think the industry and the individual players feel comfortable with the data that they can pull the trigger for a, sort of, a general application across the whole chain and also use it sort of for their competitive advantage in marketing?
David Moon: So that’s a good question. So just to be mindful that this is a very conservative industry. It’s an industry that had billions of dollars of assets tied up in traditional refrigerants. And so it’s a very cautious industry. You have to do your work upfront and testing which leads to another round of even increased sites before you get to a point where retailers are satisfied and ready to go and feel comfortable moving from one technology to the other. The fact is that we’re already — we’ve completed Step 1. And so Step 2 is 50 locations across Europe at least 50 locations across Europe and the US next year. And from there given who we’re targeting and who we’ve got commitments from for new locations for next year this is a next really good jumping point to get into what will be more rapid commercialization in 2025 and 2026.
And just remember that the opportunity in the US is further down the road it’s Greenfield, the opportunity in Europe is going to be brownfield or retrofit. So we provided guidance. We provided guidance on CO2 in the range of $100 million to $300 million by 2026. And so from the work that we’ve done thus far and detail that I’ve been able to do, I can see a path for us getting to $100 million by 2026. I think we have the opportunity and the potential to do that as long as we continue to deliver the step-by-step process for this industry. I believe that the $200 million to $300 million sort of top end of the range is going to exist. The question is going to be what is it going to take for us to be able to get there and how fast that we can do it.
And the answer is at this point is I don’t know. I’ve been in the seat for a couple of weeks. And so I need time to work with this excellent management team to further explore the strategy as it sits and how we work to get from point A to point B by 2026.
Operator: Our next question comes from the line of Larry McCullough who’s a private investor. Please proceed with your question.
