Mark Strouse: Kind of following up on Elvira’s comments there — questions there. The headwinds that you mentioned, can you go into a bit more detail as far as how much of that is within your control? I think you mentioned just now that the contract labor being too high, you lack discipline there. Just a bit more color on that or how to think about that just a more structurally higher labor cost across the world. And then the wood input costs coming down over the past few weeks that you mentioned, how is that being reflected in guidance? Are you assuming that, that stays there? Or what level are you baking in?
Thomas Meth: So I’ll start with your second question. So our guidance certainly assumes that wood costs are staying and to your first — staying where we’ve seen them now land. So I think that’s certainly one part. But more importantly, Contract labor is a classic example of being entirely within our control, right? We are fully staffed now. We’ve told — we’re fully staffed. We had a history of using contract labor where we were not fully staffed, and we lost the discipline to get contract labor out at a time when we were fully staffed. It’s entirely in our control. It’s completely unacceptable that we haven’t done this at the speed that we need to — and so it’s a very good example that when you’re fully staffed, you don’t need to have the same levels over time. You don’t need to have the same levels of contract labor. And that will certainly be a big part of driving our cost position down.
Mark Strouse: Okay. Okay. And then just a quick follow-up. The stock is down obviously pretty significantly since the peak last year. I know that’s not exactly your cost of capital. Can you talk just generally about your cost of capital, including project level debt what that looks like and any impact that, that might have on your willingness or ability to add more production and sign more long-term contracts?
Shai Even: Thank you, Mark. Thank you for the question. So as we mentioned during the Investor Day, Epes is fully funded and during Investor Day, we mentioned that what — to get like Bond to position that is fully funded, we mentioned about $275 million of regional debt is needed. And definitely, with the change in capital allocation that amount will be now lower. So we don’t see any reason not to believe that we’re now with the change in the — in our capital allocation in the prioritization of our capital allocation to see any reason not to continue with our growth program, with the potential to even further accelerate that as part of the prioritization.
Operator: Our next question comes from Ryan Levine with Citi.
Ryan Levine: is relatively simply. But if the customer contracts are take-or-pay, can you give us color as to why contracted volumes are delayed into the back half of the year in your prepared comments?
Thomas Meth: Yes. No, absolutely. So the contracts are take-or-pay. And when a customer has an operational challenge, for example, they will ask us on the basis of, hey, if you can help us we will absolutely take the volume, right? It’s always the premise, right? This requires us to actually agree to a change. When do we agree to a change? When it’s accretive to us. And when we get a premium for that change, which in this case we did get. And so and it’s going to come back with a premium in the second half of the year. We — again, we only do these kind of things when we get rewarded for it financially. We have almost 200 ships on the water a year. And many of those ships provide an opportunity to create a little bit of extra margin through the commercial services business.
We have said previously that’s about 15% to 20% of our overall EBITDA. That continues to flow through our guidance that we have outlined today. That has not changed. And as part of that 15% to 20%, you can — we call that premium that we received from the customer to move the $16 million into a different period.
Ryan Levine: Given the implications to the capital structure of those decisions, do you have the ability to force them to take the volumes and receive the cash flow to preserve the capital structure?
Thomas Meth: Yes, absolutely. We can — it’s a take-or-pay contract. We could tell the customer, sorry, we don’t really find an opportunity Unfortunately, we can’t help you. We didn’t do this in this case, but we could.
Ryan Levine: Right. And then in terms of the guidance, so you think in your comments, you mentioned that you knew about $15 million cost decline at the time of the Analyst Day when the guidance was reaffirmed. Can you give us a little color as to what new information you are in, since then? And I guess on that , just so we understand some of the numbers, in the transcript or the press release, you highlighted a $50 million shortfall to management expectations on adjusted EBITDA versus a $30 million shortfall to company guidance. Can you help us kind of understand what the differences between some of these numbers?
Thomas Meth: So at Investor Day, we’re certainly — we thought we might be — we would be trending towards the low end of the original guidance range, but we absolutely thought we were within the guidance range and we thought it was still possible. And the improvements that we — that were underway did not materialize. And as we close the books in April, March cost — the March cost position was significantly higher than what we had anticipated. And then as we don’t have the final numbers for April, but clearly, we know that April was lower than certainly we saw at the beginning of the year, but we have not seen the cost reductions that we anticipated. And with that, the outlook for the rest of the year changed as we drive cost out of the business, we’re certainly starting at a higher cost base.
And so that’s why we had to acknowledge that with a reasonably conservative view, Q2 will be about $30 million in EBITDA lower than we had thought. And the remaining $35 million will be divided over Q3 and Q4. Again, we believe we can drive costs out of the organization exactly like we anticipated from a goal perspective, but it’s going to take us longer to really drive that out of the cost position and with that, we’re — it’s just shifting a little bit to the right. The other piece of information is that over the last couple of weeks, our deep dive in South Hampton clearly indicated that it’s going to take us longer to rebuild that drive that we’ve outlined. And that’s another reason that’s setting us back.
Ryan Levine: Okay. And then just a follow-up on the $50 million shortfall versus management expectations versus a $30 million shortfall versus company guidance? What’s the difference?
Shai Even: We didn’t really — Ryan, for the first quarter, we didn’t really provide guidance for the first quarter. So I think that like a — we can take this.
Thomas Meth: No, so we moved $16 million into the different period. And $30 million is the miss on the cost bases compared to our original budget, right? And so that’s why we print it, if you take this together, $16 million and $30 million. We printed $4 million, and we had $4.6 million of incremental DGMT.
Operator: Next question comes from Pavel Molchanov with Raymond James.
Pavel Molchanov: A month ago, you obviously were sticking with the $0.905 dividend and today you zeroed it out. What was the thinking in doing a full dividend suspension instead of a cut, 50% or even 75% preserving some kind of income for the investor.
Thomas Meth: Pavel, great question. So the Board evaluated and found more accretive value for our shareholders and shoring up our balance sheet and an investment in our current fleet clearly necessary and future assets growth. And of course, the return of capital through the share buyback was certainly another consideration that — from an accretion perspective and for total shareholder return. And — when you think about the priorities that we’ve outlined: first, liquidity and leverage; secondly, investing in our existing asset fleet; third, the share buyback program; and fourth, under the right circumstances, moving up some of our investments in new plants. All this together led us to believe that a complete elimination of the dividend was a better new capital allocation strategy than any of the alternatives.
Pavel Molchanov: Will you ever consider restoring the dividend? And if so, under what circumstances?
Thomas Meth: So absolutely, Pavel. We have not moved away from our growth program here. We believe in 2026, we’re going to hit $500 million in EBITDA. That has certainly not changed. And we believe we’re going to build — that requires 2 more plants to get to $500 million in EBITDA and restoring our cost structure. Those are the 2 key elements that we need. And then beyond that, we can certainly generate more growth, but we are getting to a point where we’re certainly going to be able to consider going back to paying a dividend without in any sort of form limiting our growth potential. But the one thing that’s clear is that when we look at our opportunities and our potential, the focus on growth is certainly a key part of our strategy.
And the tailwinds from RED III that we just talked about a couple of weeks ago, are certainly materialize. Japan, we just evidenced the growth potential in Japan by signing another contract with a Japanese customer, right? So growth is certainly the focus of this company in the medium term. And as part of that growth profile, we’re going to generate cash that will allow us eventually to revisit our capital allocation program.
Pavel Molchanov: And lastly, can we get an update on older fields?
