FTC Solar, Inc. (NASDAQ:FTCI) Q2 2023 Earnings Call Transcript

FTC Solar, Inc. (NASDAQ:FTCI) Q2 2023 Earnings Call Transcript August 9, 2023

FTC Solar, Inc. misses on earnings expectations. Reported EPS is $-0.06 EPS, expectations were $-0.05.

Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the FTC Solar Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Bill Michalek, Vice President, Investor Relations. Sir, please begin.

Bill Michalek: Thank you, and welcome, everyone, to FTC Solar’s Second Quarter 2023 Earnings Conference Call. Before today’s call, you may have reviewed our earnings release, supplemental financial information and slide presentation, which are posted earlier today. If you’ve not reviewed these documents, they are available on the Investor Relations section of our website at ftcsolar.com. I’m joined today by Sean Hunkler, FTC Solar’s President and Chief Executive Officer; Phelps Morris, the company’s Chief Financial Officer; and Patrick Cook, the company’s Chief Commercial Officer. Before we begin, I remind everyone that today’s discussion contains forward-looking statements based on our assumptions and beliefs in the current environment and speaks only as of the current date.

As such, these forward-looking statements include risks and uncertainties and actual results and events could differ materially from our current expectations. Please refer to our press release and other SEC filings for more information on the specific risk factors. We assume no obligation to update such information except required by law. As you’d expect, we’ll discuss both GAAP and non-GAAP financial measures today. Please note that earnings release issued this morning includes a full reconciliation of each non-GAAP financial measure to the nearest applicable GAAP measure. In addition, we’ll discuss our backlog and our definition of this metric is also included in our press release. With that, I’ll turn the call over to Sean.

Sean Hunkler: Thank you, Bill, and good morning, everyone. Our earnings announcement today includes a mix of near-term disappointment with project delays impacting revenue as well as some very positive developments including a number of significant project wins here in the past few weeks, which will boost our performance as we head into 2024. Getting right into it, our revenue for the second quarter came in at $32.4 million, which was below our guidance range of $42.5 million to $52.5 million. For the third quarter, we now expect to see revenue in the $24 million to $34 million range, which, while we didn’t have a public guidance number out there, I can tell you significantly below our prior internal expectations. The second quarter shortfall is largely related to contracted revenue being pushed between quarters.

Specifically, projects from one customer were delayed to allow for additional planning and review around domestic content as these projects are looking to take advantage of those incentives in the Inflation Reduction Act or IRA. The review has now been completed and the approach finalized, but it had the effect of pushing revenue from Q2 to Q4. As it relates to our third quarter expectations, our bidding activity remains very high and we have won a fair amount of new business, but the timing of many projects going to purchase order has been slower or pushed out by customers, whether due to domestic content clarity, module availability or delays in permitting, interconnection or other issues. Unfortunately, given our current revenue run rate, a small handful of projects can have an outsized impact on our results.

That will improve as we get back to scale, but it’s a problem we need to manage now. The good news is that we have seen a significant uptick in project activity and wins in the last few weeks, including several notable projects, which should position us for a meaningful improvement as we head into 2024. As a result of visibility around these projects, we now expect that we’ll return to revenue growth in the fourth quarter and be on an accelerating path as we enter the new year. We expect the fourth quarter will be our highest revenue quarter in 2023. While the cadence of our revenue growth is different than we may have hoped a quarter ago, we have a number of bright spots in our business that give us a great deal of confidence in our future.

One, we believe our manufacturing cost is now in line with our leading competitors. We are more competitive than ever and we will get better with scale. Two, our average new project margins puts us on track to achieve the gross margin targets we provided in the past. This includes our target of achieving a gross margin of 12% to 18% at the $150 million quarterly run rate and a 20-plus percent margin over the longer term. Even with lower revenue in the second quarter, we saw gross margin expand another 90 basis points. We’re set up for a strong margin expansion as revenue grows. We’re confident in our cost structure and we have a lot of margin leverage. But obviously, the level of revenue, which drives cost absorption is a key driver of the actual performance.

Three, we are now actively in the market with our 1P solution. We believe the 1P market has done better in this time of restricted module availability and we didn’t have a solution until more recently. We now have a solution and a growing 1P pipeline. And with the recently received UL certification, we’re focused on converting that pipeline to awards. In fact, we just won our largest 1P award to date at 140-plus megawatts. So we are on our way. And by the way, that 140 megawatts is part of an overall 1 gigawatt award that we received in the last few weeks, which includes supplying a large multi-technology renewables project in the Pacific Northwest. Four, we continue to grow our international business and are gaining traction in new regions.

A couple of examples over the past few weeks include a new 120-megawatt award in South Africa. We also won a new 300 megawatt award from multiple projects in Italy and Spain, including utility-scale agrivoltaic projects. These will be our first projects in these countries as we continue to expand in Europe and expand our served market. We have now been awarded projects in a dozen countries outside the U.S. And with the recent addition of our 1P Pioneer solution, we believe we’ll be even better positioned to continue to grow our international business as well as our business overall. Five, our backlog has now grown to $1.6 billion with $259 million added since May 10. The recent project awards I’ve mentioned, among others, have helped us grow backlog to this new level.

Most of these new multi-project awards include projects that we expect will have near-term purchase order dates and in some cases, beginning initial production on the first projects during the fourth quarter of this year, with final projects expected to run through the end of 2025. The majority of the remainder of our backlog is 2P, which we expect will be increasingly constructed as module availability improves. The continued growth of our backlog and the recent additions of certain projects that we expect will include more near-term start dates, allows us to continue to be cautiously optimistic about 2024 and gives us a nice foundation for future growth. And then sixth, and finally, we continue to control our operating expenses. You’ll notice that our Q2 OpEx came in better than we had guided and that, along with the improved margins allowed us to keep adjusted EBITDA flat quarter-over-quarter despite the lower revenue.

We’ll continue to control costs and look for efficiencies in many places. However, we will invest more in sales and engineering to support growth and the pipeline conversion. So in summary, while our cadence of revenue recovery is slower than we would have hoped a quarter ago, we have seen an exceptional spate of wins in the past few weeks, which gives us confidence in a return to growth in the fourth quarter and into 2024. Our international expansion continues, and our newly certified 1P offering will only enhance that growth over time. We are positioned with a product cost structure that will enable our run of gross margin expansion to resume and reach new highs along with that revenue growth, and we will keep a cap on operating expenses while investing for future growth.

With that, I’ll turn it over to Phelps.

Phelps Morris: Thanks, Sean, and good morning, everyone. I’ll provide some additional color on our second quarter performance and our outlook. So let’s begin with the second quarter. As Sean mentioned, product delays in the quarter resulted in revenue coming in below our guidance range of $32.4 million. This level represents a decline of 20.9% relative to the last quarter and an increase of 5.3% relative to the year ago quarter. As we move on to gross profit, as you would expect, the delay in revenue also slowed down and caused margin to come in below our expectations. However, with project margins continuing to improve, we are still able to expand our gross margin percentage relative to the last quarter even on lower revenue.

Specifically, our GAAP gross profit was $2.2 million or 6.8% of revenue compared to $2 million or 5% of revenue in the prior quarter. On a non-GAAP basis, gross profit was $2.6 million or 8.2% of revenue compared to a non-GAAP gross profit of $3 million or 7.3% in the prior quarter. This represents a 90 basis point improvement quarter-over-quarter on the non-GAAP gross margin, our second quarter of positive margin since our IPO and a 58 percentage point improvement over the past 3 quarters. On a year-over-year basis, we delivered improvement to the non-GAAP gross profit of $8 million on less than $2 million increase in revenue. The improvements were driven primarily by improved track or direct margins helped by our product cost reduction efforts.

Moving to OpEx. Our GAAP operating expenses was $12.6 million, on a non-GAAP basis, excluding stock-based compensation and certain other expenses. Our operating expense was $9.7 million compared to $12.4 million in the year ago quarter. This was below or better than our guidance range. The year-over-year improvement was driven primarily by lower R&D and personnel-related expenses. Next, GAAP net loss was $10.4 million or $0.09 per share compared to the loss of $11.8 million or $0.11 per share in the prior quarter and compared to a net loss of $25.7 million in the year ago quarter. Our adjusted EBITDA loss, which excludes approximately $3.2 million, including stock-based compensation expense and certain other noncash items was $7.2 million, which was just above the low end of our guidance range.

The result was approximately flat versus the prior quarter and represented an improvement of $10.5 million compared to an adjusted EBITDA loss of $17.7 million in the year ago quarter. Finally, regarding liquidity, we had an operational use of cash for the quarter, offset by usage of the ATM facility for which we received $15.2 million of cash within the quarter. In aggregate, we ended the quarter with $33.8 million of cash on the balance sheet. We continue to hold note down on the balance sheet. We have an undrawn credit revolver as well as $76 million remaining under the ATM program at quarter end. So with that, let’s turn our focus to the outlook. Based upon our current view, which includes the project delay Sean’s mentioned, we expect the third quarter revenue to be flattish to down relative to the second quarter.

Our gross margin performance will be based on how revenue comes in. If the revenue is down, the lower cost absorption will lead to margins coming in lower sequentially. However, if revenue is flat or slightly up, then we could see margins come in higher than the second quarter. We expect this to be filed in the fourth quarter by a resumption in revenue growth and margin expansion as the recent project wins are expected to begin production. Specifically, our targets for the third quarter call for the following: first, revenue between $24 million and $34 million. Next, non-GAAP gross margins between $0.7 million and $3.1 million or between 3% and 9% of revenue. Next, non-GAAP operating expenses between $10 million and $11 million, and finally, adjusted EBITDA loss between $10.3 million and $6.9 million.

Looking forward, the recent uptick in project wins give us increased confidence that the revenue ramp expected in the fourth quarter should continue into 2024. So in closing, the actions we’ve taken to strengthen the company, broadening our product offerings, refocusing our sales efforts and improving our cost structure will benefit greatly moving forward. These efforts coupled with $1.6 billion in backlog and positions us to not only grow but to grow profitably. With that, we conclude our prepared remarks, and I’ll turn it over to the operator for any questions. Operator?

Q&A Session

Operator: [Operator Instructions]. Our first question or comment comes from the line of Donovan Schafer from Northland Capital Markets.

Donovan Schafer: So I first want to ask about the backlog. Every time we meet, it seems like you guys have either just come from meeting with customers or right after you rushing at the door to go meet with some more. So it’s pretty clear to me that you’re hustling and really kind of doing everything you can to generate sales and we see this in the growing backlog. But if we look at the backlog you have versus the backlog of some of your peers, it’s comparably large in size that hasn’t really flowed through or hit the financials yet. So I’m wondering if — and you’ve given appropriate kind of reasons and explanations for all of that. But is there anything additional color you can give us on the backlog that given that we haven’t seen it in the financials yet, can you give us additional kind of assurances around things like can you talk about the extent to which [indiscernible] that some peers have been using how prevalent deposits are or the significance of the size, really just anything to give us a better sense of kind of having teeth to or staying power to this backlog, that would be great?

Sean Hunkler: Yes. Donovan, this is Sean. Thanks for the question. Yes. Let me comment a little bit on the backlog. So if you think about our results, obviously, we’re disappointed by our short-term results, but we remain optimistic and excited about the future and one of the reasons is our backlog. And the team has done a great job continuing to grow the backlog. We talked a little bit about 2P versus 1P, the majority of our backlog is 2P, but we continue to add to it. We added — we talked about our 1P addition, the new project at 140 megawatts, part of an overall 1-gigawatt project that we’re super excited about. As we look forward, one of the reasons we’re excited is we feel there’s momentum and that we’re — our expectation is that we’ll see backlog conversion really in 2024. With all the momentum we’re seeing looking forward to 2024. Let me ask Patrick to comment as well.

Patrick Cook: Yes, Donovan, thanks for the question. I mean I think I’ll break it up in 2 parts. If you look at the $259 million that we booked this quarter, a lot of that is set to start kind of production in the back half of this year and in the 2024. So these are projects that with near term that will carry over multiple quarters. So that conversion time of the backlog is just going to be relatively short in comparison to some of the projects that we’ve ultimately booked in the past. But as Sean said, as we started — modules have started to get released, you’ve seen more projects ultimately go through. Our 2P backlog, when we talk with our customers is expecting to be unlocked in 2024 as we kind [indiscernible] and developers that we’ve been working with. So seeing progress and really working on those projects now that have been sitting in our backlog for quite some time, and we’re excited to convert that.

Donovan Schafer: Yes, that answers my question. As a follow-up, for guidance, you guys are still kind of relatively new growing company. And Sean, you’ve been at the helm for not the whole kind of duration of the company. So with that in mind, I’m curious if you are — the guidance process that you go through sort of internally when you decide than what guidance you’re going to kind of put out externally. Has that been evolving or a change in I’m asking because there’s kind of a learning curve and taking things out and — the miss on Q2 guidance coming in lower than what you had guided. Obviously, there’s a lot going on in the market right now. But when something like that happens, do you then kind of sharpen your pencil and say, is there something we can do from a process standpoint or procedure standpoint to get better at putting out our guidance.

Like is it the same process you went through for your third quarter guidance as the process you went to come to second quarter guidance — or are you kind of trying to figure out better ways to pin that down?

Sean Hunkler: Donovan, we like the thing of ourselves as a learning company. And like you said, we’re a relatively new company. But we spend a lot of time looking at processes and procedures from top to bottom in the company. And we always — we look at any time there’s a defect, there is an opportunity to improve further. But we spend — we take the guidance quite seriously and we do spend a lot of time internally as we think through the guidance. As we look at Q2, as we talked about, we saw some projects shift — and unfortunately, as we continue to build, our base isn’t quite yet to the point where it can — it’s very impactful when we see a few projects shift out just because our base is still growing. But for all the things that we talked about in the earnings just a few moments ago, we remain very, very optimistic about the future and the opportunities that we have.

Patrick Cook: Yes. The other thing I’d add, Donovan, it relates to the Q2 guidance, obviously, disappointing, but these were projects that we have ultimately purchase orders for, but given kind of the IRA ambiguity, the customer ultimately elected to push those out into Q4. And so these were projects that have orders in hand with the ultimate delivery and revenue recognition because of IRA move those — move those out 2 quarters just to make sure that they could take advantage of the added incentive.

Donovan Schafer: Okay. That’s very helpful. I’ll take the rest of my questions offline.

Operator: Our next question or comment comes from the line of Philip Shen from ROTH MKM.

Philip Shen: I wanted to dig into the outlook a little bit more. I was wondering if you could talk through some of the Q4 math on revenue. You talked about shipments being pushed out from Q2 to Q4. Do you see any — can you quantify the pushouts from Q3 as well? And how much of that might also be in Q4? And should we be thinking about Q4 kind of being well above $100 million? I know you haven’t put out exact guidance, but I was wondering if you could kind of bracket it for us in some way?

Patrick Cook: Yes. I mean, I think as it relates to the pushouts from Q2 to Q4, a lot of the customers are trying to get certain — reach a certain kind of completion milestone by the end of the year. So we’re not really anticipating any project pushouts from Q4 to Q1 ultimately at this time because a lot of these projects ultimately need to take the incentive in 2023. And so from the perspective of Q2 to Q4, the partner that we were working with had the additional time to optimize their kind of incentive structure and still make it under the deadline.

Philip Shen: Phelps, can you talk about how much you saw maybe from Q3 to Q4 or maybe into later quarters?

Phelps Morris: Yes. I mean I think overall, Phil, in terms of pushouts, we’re very comfortable with the 2024 build-out. When you look at Q3 to Q2, there is also some additional delays. I mean, I think if you look at kind of where we’re bracketed, I think we said qualitative relations, we’re not providing Q4 guidance at this point that will be the highest quarter that we’ve delivered to date within the year as our expectations for the quarter. There is potential upside there, basically it’s predicated upon how much manufacturing production we can get within the quarter. So there will be some — depend on the time of the POs that we received in Q3 that will drive the actual high end of the Q4 revenue, Phil.

Patrick Cook: And the other part, Phil, if you look at the contract and — or the awards that we got that kind of articulated between South Africa [Technical Difficulty] what we’ve got in the U.S. and then Europe and Spain. I mean these are projects that have either single — large single projects or projects that have defined start dates that we’re going to start recognizing revenue in the back half of this year and into — it kind of carries in multiple quarters into 2024.

Philip Shen: Great. Okay. In terms of the backlog, $1.6 billion, it’s a big number. It’s much higher than what you quarterly revenue run rate would suggest. You talked about in your prepared remarks, meaningful growth in 2024. Consensus revenue has you close to $500 million of revenue in ’24. Can you share what part of your backlog is designated for 2024?

Patrick Cook: I don’t think — we’re not sharing how much of our backlog is broken out into 2024. I guess I’d leave kind of with 2 points. One, as we looked at the kind of the historical backlog and the continued pushouts with lack of module availability, we’re now working with those developers for kind of start — anticipated start dates in 2024. In terms of kind of the 2024 and consensus numbers, really not looking to reset expectations at this time at all.

Operator: Our next question or comment comes from the line of Kashy Harrison from Piper Sandler.

Kasope Harrison: Just one for me as my other questions were asked. So you guys use north of $20 million of cash in 2Q organically, which, as you indicated, was funded with the ATM. I was just wondering if you could speak to your expectations surrounding cash flow from Ops in the second half of the year. Is it — and then working capital as well? Just trying to get a sense of cash needs in 2H 2023? And that’s it for me.

Phelps Morris: It’s Phelps. So thanks for the question. I think if you look at Q3, right, the guide is an EBITDA burn for the quarter, but what we see as a potential offset is we anticipate the current forecast to de-leverage some of the AR this quarter with some chunky collections that we’re anticipating to come in that will offset some of that. And then in addition, as these new projects hit within the quarter, you’re going to get some additional deposits and down payments that would offset some of that potential operational burn as you build up the revenue base.

Sean Hunkler: Thanks for the question.

Operator: Our next question or comment comes from the line of Jeff Osborne from TD Cowen.

Jeffrey Osborne: [Indiscernible] but can we just talk about the linearity in the quarter? Was this problem that came up late in the quarter would be part a of the question; and b, you had sort of a laundry list of issues between module availability, interconnection, permits, et cetera. Is there a way of rank-ordering those?

Sean Hunkler: Jeff, I would — this is Sean. I would say, as we mentioned in the remarks, our biggest single issue was the shift of projects related to the domestic content, the customer basically finalizing their strategy. So that was — that accounted for the lion’s share of the miss.

Jeffrey Osborne: And was that something that developed late in the quarter versus expectations?

Sean Hunkler: I think yes, it was. So as Patrick mentioned earlier, Jeff, we had the POs. They made a shift in terms of their strategy, mid-quarter to once some of the IRA information came out as a consequence that’s where it pushed out to the later quarters.

Jeffrey Osborne: Got it. I just — my last question is just you made the comments on the margins, which are helpful at different revenue rates. Can you just talk about the overall pricing environment, both domestically and internationally?

Patrick Cook: I think from a pricing perspective, with our cost structure that we have, we’re able to really price these projects appropriately. We’re not seeing kind of a race to the bottom in the geographies in which we’re currently engaging with themselves. In terms of pricing and margins, the U.S. continues to be a really good sector for us and continues to expand our margins. We’re really excited about the 300 megawatts that we’re going to be doing with RE or 5E across 11 different projects, 2 large-scale utility projects and some distributed generation that’s all a very, very good and healthy margin. So — we’re not seeing a lot of pricing pressure. We’re seeing the ability for us to compete with our cost structure and deliver — continue to grow our margin base.

Operator: Our next question or comment comes from the line of Julien Dumoulin-Smith from Bank of America.

Unidentified Analyst: This is actually Morgan Ren for Julien here. Thanks for the comments this quarter, I guess, if you could kind of elaborate on the gross margin inflection that you’re expecting in the fourth quarter, that would be helpful given that this is going to be kind of the record revenue base, I understand that the previous guidance for 2Q that wasn’t hit given the revenue issue I guess, should we expect gross margins maybe in excess of that sort of 2Q type level given the sort of confidence that you have around the 4Q guidance, volume and revenue base?

Patrick Cook: Yes. Morgan, thanks for the question. So I think the expectations for Q4, as we said earlier, it’s going to be the highest for the year in terms of expectations. In terms of getting operating leverage on the business, obviously, as you grow the top line revenue, your overhead gets some leverage on top of that. We’re continuing to see the project margins be very strong individually. What you’re seeing in Q2 and Q3 — from Q1 to Q2, despite the fact that the revenue came backwards a little bit in Q2, we’re still able to grow the gross margins by 90 basis points, which I think is a good proof point to everybody of the individual product margins. If you look at the variability in the guidance range for Q3, that’s really just driven by the overhead that is basically the floor of the overhead that’s not going to branch it up one way or the other.

So — in terms of margin for Q4, again, we haven’t guided to that. But again, as you can anticipate, if you look back kind of to Q2 guidance range at those type of revenue levels, that’s where we’d anticipate margins to be at this point based upon getting the operating leverage on the overhead as well as the project margins that we’re seeing in the pipeline.

Unidentified Analyst: Got it. That’s helpful. And then last one for me. In terms of the project pipeline or the backlog that you’ve outlined, you talked about kind of split between 1P and 2P where 2P is currently the lion’s share of the backlog. But it sounds like based on your prepared remarks that — the 2P projects are kind of particularly delayed in terms of their ability to close because the module availability concerns. I guess, what’s the confidence that like the lion’s share of that backlog then flows through, given that it sounds like most of those projects are tied to 2P projects, which are most acutely exposed to the module availability concerns that you’ve outlined?

Patrick Cook: Yes. I mean, I think — thanks, Morgan, this is Patrick. I mean I think from our perspective, we’ve seen the module environment improve kind of through the back half of the year, and we’ve seen the engagement level on these defined projects that are in our backlog really start to ramp up as we start going through final design, engineering, getting the site design finalized and ultimately ready to go. And so there’s been an uptick in activity to get those projects ready to start construction in 2024. And in previously, it’s been more of a kind of wait and see as modules become available. And with the release of more and more modules, those projects are moving forward.

Sean Hunkler: We’re definitely seeing strong momentum as we look into 2024 for backlog conversion.

Operator: Our next question or comment comes from the line of Graham Price from Raymond James.

Graham Price: Maybe just one more on the quarter-over-quarter margin improvement. You mentioned a number of items on the cost side. Was wondering if ASPs were up quarter-over-quarter and just kind of the relative contribution between that improvement from pricing versus the cost side?

Sean Hunkler: So I would look at it, Graham, that really our — a lot of it is coming from the cost improvements that we continue to drive. And so the team has been absolutely relentless in taking cost out of both our 2P product as well as our 1P product. And so that has been a major factor in contributing to the margin uplift.

Graham Price: Got it. And then for my follow-up, great to see the expansion in Italy and Spain. Wondering, looking forward, how we should think about the international versus U.S. booking mix and how that’s trending?

Sean Hunkler: So we’re very excited about the progress we’re making internationally. We talked about the new award in South Africa. And as you mentioned, the projects in Spain and Italy, we see continued progress in markets like Australia as well. However, our still — we’re still seeing strength, obviously, in the U.S. environment. And so I think over time, we’ll see the international continue to strengthen as a percent of the total. But the U.S. market will still continue to be very, very strong core market for us.

Operator: [Operator Instructions]. Our next question comment comes from the line of Sameer Joshi from H.C. Wainwright.

Sameer Joshi: On the G&A front, it seems you have been able to control those costs fairly well. Was there any onetime benefit on a non-GAAP basis that might have been here? Or is this the level we should expect going forward?

Phelps Morris: Yes. So thanks for the question. No, I mean that’s an area that we’ve obviously been very focused on is the OpEx side. We’ll continue to have a focus on OpEx. It’s something that we continually review as a management team. But no, that’s the areas that we’ll continue to keep that in check control the things that we control as there is lumpiness in the business with public starts and project pushouts, but this is the one area that we’re going to control and we’ll continue to keep an eye on that.

Sameer Joshi: Okay. And just one more. Of the $259 million new orders, what proportion of this was non-U.S. LPA?

Patrick Cook: All of it is non-U.S. LPA. So of what we booked this quarter, it’s either international or the projects have models.

Sameer Joshi: Okay. And just maybe if I can, if I may. One of the projects announced today — project wins announced today includes floating solar installation. Can you let us know what your capabilities are on that front?

Patrick Cook: So no, great question. So we will not be providing the floating solar for this particular project. We are going to be providing 1 gigawatt worth of trackers. But this is part of a pretty groundbreaking just generally renewable energy project in the Pacific Northwest, and we’re excited to be a part of it. But we are delivering our 1P and 2P tracker in the mode of a gigawatt.

Operator: Thank you. I’m sure no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing comments.

Sean Hunkler: Thanks very much, everyone, for joining us. We appreciate your time. And while we do have disappointment with our Q2 results, we are absolutely optimistic about the future and the opportunities out there. So thank you again for your time and we look forward to our next interaction.

Operator: Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.