Natural Gas Services Group, Inc.

Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. Operator assistance is available at any time during the conference by pressing star zero. Your call leaders for today's call are Alicia Dada, IR Coordinator, and Steve Taylor, Chairman, President, and CEO. I would now like to turn the call over to Mrs. Dada. You may begin.

Thank you, Bailey, and good morning, listeners. Please allow me a moment to read the following forward-looking statement prior to commencing our earnings call. Except for the historical information contained herein, the statements in this morning's conference call are forward-looking and are made pursuant to the safe harbor provisions as outlined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, as you may know, involve known and unknown risk and uncertainties which may cause natural gas services groups actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise, the introduction of competing technologies by other companies, and new governmental safety, health, or environmental regulations, which could require natural gas services groups to make significant capital expenditures. The forward-looking statements included in this conference call are made as of the date of this call, and Natural Gas Services undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, but are not limited to, factors described in our recent press release and also under the caption risk factors. and the company's annual report on Form 10-K follows the Securities and Exchange Commission. Having all that stated, I will now turn the call over to Mr. Steven Taylor, who is President, Chairman, and CEO of Natural Gas Services Group. Steven?

Thank you, Alicia and Bailey, and good morning, everyone, and welcome to NGSG's first quarter 2022 earnings review. Last evening, we issued a press release announcing our first quarter financial and operating results and filed our annual report on Form 10-Q with the U.S. Securities and Exchange Commission. The release and filing can be found on our website. This morning, we also issued an additional press release announcing my decision to retire as president and chief executive officer of the company. I know big life decision is easy, and there's never a perfect time for this type of transition. After 17 years at the helm of Natural Gas Services Group, this feels right. In consultation with our directors, we felt the company's business was in a good position, and we have worked through most of the COVID-related issues, providing a good opportunity for transition. While my day-to-day responsibilities will slow a bit, I will remain chairman of the board of directors while continuing to work closely with key customers of the company and will serve as an advisor during the transition. Most importantly, I will remain a significant shareholder and will continue my commitment to doing everything I can in my role to build shareholder value. I'm happy to say that our lead independent director, John Chisholm, has agreed to step in as the interim president and chief executive officer. John is the former president and CEO of Flowtech, a New York Stock Exchange-listed oilfield service concern, and the co-founder of ProTechnics, a leading reservoir characterization technology company that is now owned by Core Laboratories. John's willingness to step in should provide both comfort and confidence, as it does for me, about the future of our company. John and I will work closely together in the transition, and I have pledged to him my unwavering support in anything he needs. While John is traveling today, he will join us for some introductory comments near the end of the call. That said, I am pleased to take a more detailed look at what we believe is a solid start to 2022. As noted in our earnings release, our overall business is continuing to grow both sequentially and on a year-over-year basis. Year over year, total revenue grew 11% with our flagship rental business leading the way. Sequentially, total revenues also grew 13% primarily due to a strong sales quarter. Our core rental compression business continued to gain market share from our upstream customers with our fifth consecutive quarter rental revenue growth. Compression rental revenue grew 4% sequentially and approximately 12% on a year-over-year basis, primarily driven by an increase in active rental horsepower. As anticipated on last quarter's call, we recorded a reduction in rental expenses from the highest experienced last year especially in the fourth quarter. Sequentially, rental expenses declined 20% from the fourth quarter peak. While we, like everyone, are experiencing inflationary and supply chain pressures across the business, we are pleased with our cost reduction efforts. We do realize, however, that we still have work to do to meet our goal of 50% adjusted margins on our rental business by the end of 2022. Our compression sales business experienced a good quarter with sales revenue up almost $1.8 million over the fourth quarter of 2021, with adjusted gross margins of 31% during the quarter. We have not yet seen a change in demand from our traditional upstream customers, and no sales were recorded from them this quarter. Instead, sales this quarter were driven by non-traditional energy customers. This includes various types of projects that we are developing an expertise in and we should see increasing sales volume from this energy transition segment in the future. Now, let's look at the financial details of the quarter. From a total revenue perspective, NGS reported total revenue of $20.3 million for the first quarter of 2022. This is a $1.9 million or 11% increase from the same quarter in 2021 as a result of a $1.8 million increase in rental revenues with a $180,000 or 7% increase in sales. When comparing consecutive quarters, we had an increase in total revenues of 13%. This is driven by a $1.8 million increase in sales and a $650,000 increase in rental revenues, which were slightly offset by a little over $100,000 decrease in our service and maintenance revenues. While our sales revenues fluctuate quarter to quarter, our rental revenues have grown consistently, 4% and 12%, respectively, in both sequential and year-over-year quarters. Significantly, NGS has increased rental revenue the last five quarters in a row. Total adjusted gross margin, which does not include depreciation, for the three months ended March 31, 2022 increased to $8.9 million from $8.6 million for the same period ended March 31, 2021. Adjusted gross margin for the three months ended March 31 was 44% of total revenue. The increase in margins for the quarter were due to increased margins on compressor cells primarily. Sequentially, adjusted gross margin for the first quarter of 2022 increased to $8.9 million from $4.3 million in the prior quarter. As a percentage of revenue, adjusted gross margin also increased to 44% this quarter compared to 24% in the prior quarter. If you recall, in the prior quarter, the majority of the gross margin pressure was from increased rental costs due to a higher mobilization, commissioning, and startup costs, and to a lesser extent, an increased level of unabsorbed costs in our manufacturing shops. While we, like everyone, are experiencing inflationary pressures across the business, we are pleased with our cost reduction efforts and anticipate further improvement throughout the year. Sales, general, and administrative expenses decreased 5.5% and 10.7% respectively in year-over-year and sequential periods. Year-over-year, we realized lower stock compensation and non-cash deferred compensation expense with a reduction in non-cash deferred compensation expense also driving the sequential reduction in SG&A. Operating income for the first quarter of 2022 was $382,000 compared to a loss of $369,000 in the first quarter of 2021. This increase is due to an increase in sales margins as well as a slight decrease in SG&A and depreciation expense. Sequentially, operating income increased to $382,000 in the first quarter of 2022 from an operating loss of $8.2 million in the fourth quarter of 2021. This increase in comparative quarters is primarily due to the aforementioned lower sales and rental margins and higher SG&A in Q4, loss and retirement of units from our fleet of $3.1 million, and inventory write-offs of just over $200,000. Our net income after tax for this quarter was $337,000. This compares to a net loss of $394,000 in last year's first quarter and a net loss of $5.6 million in the fourth quarter of 2021. We reported earnings per diluted share of 3 cents for the first quarter of 2022 compared to a loss of 3 cents per diluted share in the first quarter of 2021 and a loss of 42 cents per diluted share in the fourth quarter of this year. I mean, fourth quarter last year. EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, and our adjusted EBITDA excludes inventory allowances, fleet retirements, and stock conference expense, all of which are non-cash. Adjusted EBITDA for the three months into March 31, 2022 was $6.8 million, an increase from $6.5 million for the same period in 2021. Adjusted EBITDA also increased approximately $4.5 million sequentially, from $2.3 million last quarter to $6.8 million in this quarter, primarily due to lower costs and improved margins. Total sales revenues, which as a reminder includes compressors, flares, and product sales, was $2.9 million this quarter. This is an increase from $2.7 million year-over-year and from $1.1 million last quarter. The change in the year-over-year quarters is due to normal volatility in the various sales components, but the sequential growth is attributable to the completion of two good-revenue, high-margin transitional energy compression projects. For this current quarter, we had a total sales adjusted gross margin of $907,000 or 31%. This compares to gross margin of $95,000 or 4% in the first quarter of 2021 and negative gross margins of $750,000 in the last quarter. First quarter 2022 compressor-only sales increased slightly to $2 million from $1.9 million in the first quarter of 2021. We did not record any compressor sales in the fourth quarter of 2021. Compressor-only sales margins were $621,000 for the three months ended March 31, 2022, compared to a loss of $136,000 for the same period a year ago and a loss of $1 million last quarter. As mentioned, we have not seen an increase in demand from our traditional upstream customers for purchase compression, and as far as our customers are concerned, capital allocations seem to have shifted to rental compression rather than allocating capital to owning compression. We have, however, seen increases in interest and demand from nontraditional energy providers and are working to build those relationships. With the completion of this quarter's transitional energy projects, our sales backlog as of March 31, 2022 dropped to $100,000. However, even though, as mentioned, sales projects are scarce, our compressor rental backlog has filled that gap with almost $24 million of compressors being built or scheduled to be built for the balance of this year. Rental revenue in the first quarter of 2022 was $17.1 million, compared to $15.3 million in the first quarter of 2021, an increase of 12% year-over-year. For the sequential quarters, rental revenue grew to $17.1 million from $16.5 million last quarter, an increase of 4%. Rural adjusted gross margins this quarter were 46%, a 3% or $285,000 decrease from the 53% gross margin we saw year-over-year, but a significant $3 million increase from the 30% gross margin last quarter. As previously noted, our fourth quarter 2021 margins were impacted by non-repetitive deployment and commissioning expenses as well as initial oil and antifreeze fills, which can be significant, especially in larger horsepower units. While we eventually recover those costs, the recognition of the expense and the reimbursement of such will from time to time result in cost-revenue mismatches like those that we experienced last year and particularly in the fourth quarter. In addition to the above, while we are encouraged by a sustained oil fill activity, it has created significant additional personnel expense. Not only has our headcount increased to meet new equipment demand, wages are rising and overtime is prevalent as finding qualified employees, especially in the Permian, is challenging. Hiring rotating employees from outside the Permian also results in higher training, living, we have to provide room and board, and travel costs, as well as new equipment and transportation expenses. These inflationary pressures are reflected in our Q1 2022 results. We are working to rein in these cost increases, and to the extent possible, increase rental rates to offset some of these cost increases. As mentioned in the past call, we have instituted an 8.5% price increase on our rental customers that was generally effective May 1. Obviously, no one likes price increases, but ours have pretty universally been met with acceptance. We still have some increases to implement, but the majority have been accomplished. Rental fleet size at the end of March 2022 totaled 2,033 compressors, or over 421,000 horsepower, which also reflects an addition of 10 units or approximately 3,100 horsepower during the first quarter. Over the past 12 months, we have added 60 new fleet units, totaling approximately 17,600 horsepower, with the majority of that horsepower being classified in our large horsepower category. As of March 31, 2022, about 45% of our utilized horsepower is made up of compressor units that are in excess of 400 horsepower per unit. We announced our large horsepower strategy about five years ago with the intent of shifting the NGS rental fleet profile towards larger horsepower and simultaneously minimizing the small horsepower component of the fleet. This was driven by recognition that the large horsepower market offered greater growth opportunities while the small horsepower fleet was becoming commoditized by the mom and pop operators. Currently, our rental fleet is approximately 45% large horsepower and 18% small horsepower. The balance is in the medium horsepower segment of our fleet. We're continuing our growth in large horsepower, and as you may know, the vast majority of our capital dollars go to larger horsepower equipment. So, while the company will continue to penetrate this market, I think we can say the transition to a large horsepower provider has been successful. Strategy accomplished. Our horsepower utilization is approximately 73% and unit-based utilization was approximately 63% at the end of this quarter. On a unit basis, utilization was approximately 63% at the end of this quarter compared to 62% last quarter and 56% a year ago. Our capital expense for new gas compressor rental fleet units in the first quarter, which does not include work in progress, was approximately $8.1 million. With $100-plus oil prices and $6-plus gas prices, it's no surprise that we are seeing increased activity of our customers, primarily in the Permian Basin this year. To address that, we have revised our capital expenditure budget up to approximately $30 to $35 million of growth compression capex this year. This increase, and in fact, the large majority of the total capital budget, is for large horsepower compression for which approximately 90% has already been contracted at market-leading rates and terms. From a balance sheet perspective, we continue to have no debt outstanding at the end of the first quarter, with our cash balance at the end of the first quarter at $16.4 million. This compares to cash a year ago of $30.7 million and last quarter of $22.9 million. In addition to funding our capital expenditures with cash flows from operations, we utilized $2.9 million of cash to repurchase over 246,000 shares of our common stock on the open market this quarter and $10.8 million worth over the past year. This equates to 7.3% of our outstanding shares. Our average purchase over the course of 2022 is 11.88 cents. $11.98 per share, well below our calculated intrinsic value and below our current price. In spite of our strong capital spending on committed rental equipment and our stock buyback program, our cash balance in all comparative quarters has continued relatively steady due to our ability to deliver strong operating cash flows. The combination of our cash balance and untapped credit line continues to provide ample liquidity in nearly every conceivable scenario. We generated positive net cash flow from operating activities in this quarter of $5 million, or 25% of our quarterly revenue. This is a strong cash flow conversion. Before a few closing comments and taking your questions, I would like to introduce John Chisholm, the incoming interim president and chief executive officer. John is traveling today, but he wanted to take a moment to introduce himself. John, I appreciate you taking time to join us today, and welcome to the team.

Steve, thank you, and thanks to each of you on the call for taking the time and having an interest in Natural Gas Services Group. I won't take a lot of your time. I want to spend just a minute to let you know. I'm excited about the opportunities ahead at NGS. That said, what is most important this morning is to acknowledge and thank Steve for his incredible effort over the last 17 plus years in the pilot seat at NGS. As I said in the press release this morning, when Steve arrived at NGS, we were a small, obscure compression company located on the back roads of Midland. Today, Due to Steve's resilient leadership, NGS is consistently acknowledged as a leader in oilfield compression and, more importantly, one of the few oilfield service concerns that has maintained financial strength and stability throughout the last oilfield cycle. Very simply, Steve is the epitome of what a good corporate leader should be. He has left the company he has led in better shape than when he found it. For that Steve, all NGS stakeholders are grateful for your service and your effort. And I look forward to working with you as chairman as we continue to move NGS forward into the future. While there is no Hippocratic oath in the oil field, my mission as the interim president and CEO is first and foremost to do no harm. My goal is to build on Steve's leadership, be a good steward of capital, and look for opportunities across the spectrum to grow the reach and success of NGS. In the coming weeks, we will talk more about our objectives for the balance of 2022. However, today we will focus on Steve's success and the details of the first quarter successes. I look forward to visiting with many of you soon. Again, Steve, thank you for your nearly two decades of service. On behalf of all the associates, customers, and shareholders of natural gas services. We are beyond grateful for your service. As you mentioned, I'm traveling. I'll turn it back to you, my friend Steve, to answer questions. And again, what a job.

Okay, thanks, John. Thanks for the kind words. I look forward to working with you as we transition going forward. John has been on the NGS board for over a decade and is very familiar with the company. I've known John from my Halliburton days, and that's been over 20 years, and he is a very capable executive. In my new position as chairman, I'll be able to assist and advise where I can and help maintain and grow our vital customer relationships. My holdings in NGS exceed 5% of the outstanding shares, so I want to assure everyone that I'm committed to the ongoing success of the company. If you know the joke about the chicken and the pig, it reflects my sentiments. In a ham and egg breakfast, what's the difference between the chicken and the pig? The chicken provides the eggs, but is only merely interested in the quality of the breakfast. The pig provides the ham and is vitally and irretrievably committed. I'm the pig. I've got skin in the game. Now for final comments. We had a good quarter, and I think the building blocks were in place to capitalize on the opportunities before us. primarily being our large horsepower strategy. Rental revenues have grown quarter to quarter over the past year, and this quarter was especially successful compared to the industry. Our sales revenues were good this quarter, and I think there are non-traditional transitional energy opportunities that we can take advantage of. As we demonstrated what we said last quarter, our costs are getting under control and our margins are expanding. And last but not least, commodity prices are finally cooperating. There are certainly challenges, cost and supply chains are the priorities, but we have plans in place to address those. Natural Gas Services Group remains one of the fuel-filled companies with a strong recurring rental stream, no debt, a significant cash position, and the ability to consistently generate meaningful operating cash flows. I'm grateful for the efforts of our employees and their continued efforts as we work to make 2022 another successful year for Natural Gas Services Group. Bailey that's the end of my prepared remarks and I'm ready to take questions now so if you would please open the phone lines.

Ladies and gentlemen at this time we will conduct the question and answer session. If you would like to state a question please press star 1 on your phone now and you will be placed into the queue in the order received. You can press pound 1 at any time to remove yourself from the queue and we are now ready to begin. And our first question will come from Rob Brown with Lake Street Capital. Rob, please get your question.

Just touching a little bit on the sales at first here in the energy transition business, what's sort of the driver there, and is that a market that you see continuing, or is this hard to say at this point?

You know, I'm not going to tell you the exact type of projects just from a competitive standpoint. But, you know, they're, you know, they're, I guess, you know, there's nothing exotic or energy transition projects, you know, so it's along the lines of what everybody's looking at as far as, you know, deriving natural gas from, say, you know, transitional sources. The, as I mentioned on the call, the projects are typically high revenue, high margin type projects. They tend to be somewhat specialized, you know, either using, uh, you know, exotic metals, uh, high pressures, things like that. And that's, you know, those are areas we built our kind of our niche expertise in the sales business, uh, over time. So we're well positioned to take advantage of those. Um, we're continuing to pursue projects like that. Um, you know, we've got some bids out, we haven't heard, we're going to be bidding some other stuff, but, um, you know, it's hard to say it's hard to project what that business is going to be like. I mean, you know, the, The traditional sales business has been volatile for all 17 years I've been here. So, you know, this transitional energy business is, you know, maybe the same. It's just hard to predict right now, especially with it in its nascent, you know, infancy. But we think there's opportunities out there. We think we're well-positioned and well-qualified to take advantage of them. So, you know, we're going to kind of, have to develop them to a greater degree, to a higher volume, and see where it comes out. But I think we're in good shape for them. We've done some the past year. So we're going to continue to develop that piece of the business.

Okay, great. And then on the rental side, it sounds like demand has picked up quite a bit. Maybe some further color. Are you seeing just the pure dry gas business picking up as well? And I guess the CapEx increase that you guided to, what's driving that and what areas are driving that?

Yeah, we're seeing pickup in all areas. Obviously, the Permian is the primary for anybody in the oil field nowadays, and that's primarily driving our large horsepower growth and activity. But we're seeing some pickup in the dry gas areas, obviously with $6 gas, which we haven't seen in years. I actually never thought we'd see it again. you know, that's sort of got the interest of operators that are either there or, you know, that want to be there. So we're, you know, you look at areas like the Barnett Shale, which has been, you know, flat to down for a decade, and all of a sudden we're seeing, you know, a little more drilling, but we're seeing some customers start to pick up some compression, you know, and do some more things. So it's not a It's not a land rush at this point. The operators still are pretty conservative with their dollars and what they're going to do and where they're going with it. But we're seeing some pickup in the Barnett, Central Texas, Appalachian, stuff like that. Now, the CapEx, part of your question, that is driven by large horsepower. like I mentioned, 90, 95% of that is large horsepower, and about the same is already You know, it's committed. So what we're building in the increase we just talked about are committed projects, already signed up at good rates and good terms. So that CapEx driver is going to be big horsepower. It has been for the last three or four years, but it's continuing that way. From a small horsepower and even a medium horsepower standpoint, we really don't need to spend any capex on that. We've got adequate inventory of equipment that we can just make ready and put out, and that's what we're doing for it. There's very little call for capex in that medium to small horsepower range, which has been by design over time. Majority of our capital goes to high horsepower. It matches our strategy, and as I mentioned, we've been successful in implementing that strategy, growing into that piece of the market, and intend to continue it.

Okay, great. And then on the margin improvement, I know there's sort of one-time costs in Q4, but is this a good margin level or how do you get this margin level in terms of rental? How do you get this margin level to increase? Is it pricing or are there things you can do on the cost structure?

It's going to be all of the above. It's going to be higher revenues, it's going to be lower costs, and it's going to be some price increases. So, you know, nowadays with upward pressures on costs from inflation, supply chain issues and stuff like that, I mean, you've got to use every lever. You've got, I mentioned the price increase we've put in place, about 8.5% on May 1. We've still got some others to implement, but we got a lot of them in, so we've got to have these price increases to dull some of these cost increases. And then additional horsepower just adds incremental revenue to our established infrastructure and obviously cost reduction. So it's going to take all that stuff to continue those margins up. And as I mentioned, as I committed to in the last quarter's call, we intend to be at 50% gross margin on the rental side by the end of the year. We're at 46% now. So, you know, the trajectory is in the right direction. And, you know, so in spite of costs and supply chain issues, we intend to hit that mark. And that's how we're going to do it.

Okay, thank you. I'll turn it over. Thanks, Rob.

And our next question comes from Tate Sullivan with Maxim Group.

Hi, Tate. Thank you. Hi, Stephen. Congratulations on your next steps and a great transition for the next year to the chairman spot and continue to be customer facing.

Yeah, thanks.

And then regarding facing customer and the customer mix as well, I mean, you had 79 customers in the first quarter down slightly. Are you seeing some smaller customers that are a bit more aggressive than the larger customers? Or can you please comment on your customer mix in general? Has it changed in the last year?

Most of the growth we're seeing from a CapEx and revenue standpoint are larger customers because it's larger horsepower stuff. It's pretty expensive to build. It's a... you know, decent operating expense for the operator. So it takes a larger, you know, company to typically stand that stuff and, you know, employ this equipment and things like that. So most of the CapEx drive and most of the revenue drive are larger customers. Now, where we're seeing smaller customers kind of come back in a little bit is in these dry gas areas, you know, where over time Not surprisingly, those have migrated down to smaller customers. And again, as I mentioned, the smaller equipment, the smaller areas, the smaller customers, that stuff has tended to become commoditized over the past decade. And that's why we've... moved out of it quite a bit over those periods. But we are seeing those guys kind of pop up a little more. So the small to medium customers are the ones kind of driving some of the just pure natural gas activity we're seeing. As I mentioned, it's not a big deal right now. I think over time we'll still see some growth in that area. But If you want to try to split the customers up, it's the small to medium ones in the natural gas plays and then, you know, say some larger medium and large customers in the oil plays.

Thank you. And then following up Rob's question from earlier, you mentioned the nontraditional purchasers of your compressors. What was sales backlog there? And can these non-traditional energy customers be potentially rental customers? So two questions.

The sales backlog, I say, is only $100,000. We finished up a couple of big projects this quarter. If you recall, we reported no compressor sales last quarter, and this is the volatility of the sales piece we've always talked about. Although there were no revenues recorded, that didn't mean we weren't building stuff, and obviously we were building these projects that we were able to book this quarter. So the backlog is admittedly small, but as I mentioned, we've filled in our shops now with a lot of committed rental equipment on the large horsepower side. The nontraditional business right now is pretty much a... sales type business and not a rental business and that's really because there are so many government incentives in that arena that you know actually these guys are swimming in in money you know they're getting extraordinary prices for their gas on a per MCF basis so you know money Money always has bounds, right? But sometimes it seems like there's not a whole lot of bounds on some of this stuff that's obviously taxpayer-driven and tax-driven. So right now it's pretty much of a sales-type market. And some of that stuff – We're okay with it being a sales market. When you get into some of these areas to where you have some ultra high pressures or you have some very corrosive gases, that doesn't make very good rental equipment because it's highly specialized. If you ever get it back, it never goes out, so you've got to spend money on it to refurbish it and refabricate it, actually. Right now, we're okay with it being a sales market. Obviously, the ups and the downs are part of sales, but as we develop it, we're going to learn more where there may be rental opportunities, if any. Some of the maybe more recurring revenues we see out of that business is maintenance. We can sell the equipment, but a lot of these people we're dealing with are not familiar with heavy duty oil field type equipment like this. And although they need it, they're not familiar with it, don't know how to operate it and things like that. So we're starting to see some inklings of some decent maintenance revenues out of some of this stuff. So right now, It's a sales market, but the recurring revenue seems to be potentially some maintenance activities. But that's right now. We'll see how it develops, and we'll try to be aware of rental opportunities. But again, whether they come or not will also depend on whether we want to do them or not. This just may be primarily a sales market. Thank you, Steve.

Have a great rest of the day.

Okay. Thanks, Dave.

And our next question comes from Kyle Kruger with Apollo Capital.

Yes. Thank you for taking my question. Steven, is there a plan or a search underway to find a permanent replacement for the CEO position?

The board has put together a plan going forward, obviously, with the interim title. John's not... expected to be a five- or ten-year sort of person. John is eminently qualified to come in and take the day-to-day. Obviously, I'll assist him all I can. But the board has got the plan to put John in there. and we'll be looking, you know, for someone to be more permanent. Now, again, you know, when that permanent person comes in is a matter of question right now, but there's a plan in place. So, you know, that's really, you know, I can't, you know, predict anything beyond, you know, from a timing standpoint, anything beyond that, you know, John's interim now, and right now we're just focused on the transition going forward.

Okay. As longtime CEO and major shareholder, you're very closely identified with the company. With your departure, let me ask this, has the board considered an outright sale of the company?

You know, that's, you know, the board, you know, I've been on the board 17 years, too. You know, we always consider what might come up, you know, what people approach us with and things like that. That's certainly our responsibility as a board. You know, there's no current discussions of selling the company, putting it up for sale or things like that. But, you know, I, you know... I'd be remiss as chairman. I think the board would be remiss if we didn't say that, you know, if a – Irresistible opportunity comes along, we've got to look at those things. Now, sometimes irresistible opportunities turn out being resistible. We've seen some of that in the past, but right now the focus of the board and the company is really to grow the company, as we've mentioned. Make the transition. I'm going to be chair through another year. So certainly I'm here to help John transition, providing assistance he wants, concentrate on a few particular areas. But no, the current discussions aren't a sale. The current discussions are growing the business and looking at opportunities to continue to grow it.

Okay, thank you. Okay, thank you.

And as a reminder, if you would like to state a question, please dial star one on your phone keypad, and you'll be placed into the queue in the order received. You can press pound one at any time to remove yourself from the queue, and we will pause for just a moment to allow questions to queue. And there are no further questions at this time. I will turn the call back over to Mr. Taylor.

Okay, thank you, Bailey. Although I'll continue to be involved with the company, I want to thank everyone I've had the pleasure of getting to know over these past years. Obviously, that includes all our employees, customers, and suppliers, but it also includes the investor community, investors and analysts. I've learned a lot from everyone. I consider most friends. I look forward to staying in touch. Again, thank you for joining us on our quarterly conference call. I appreciate your time this morning. where you're likely to hear a different set of voices next time, we are confident that the future of National Guest Services Group is bright. Thank you.

This concludes today's conference call. Thank you for attending.