CECO Environmental (NASDAQ:CECO) Q1 2021 Earnings Call

0:00 Good morning, ladies and gentlemen, and welcome to the SECO Environmental Q1 2021 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Matt Eckel, Chief Financial Officer of SECO Environmental. Please go ahead. Thank you for joining us on the SECO Environmental first quarter 2021 conference call.

0:48 On the call today is Todd Gleason, Chief Executive Officer, and myself, Matt Eckel, Chief Financial Officer. Before we begin, I'd like to note that we have provided a slide presentation to help guide our discussion. The call will be webcast along with our earnings presentation on our website at cecoenviro.com. The presentation materials can be accessed through the investor relations section of the website. I'd also like to caution investors regarding forward-looking statements. Any statements made in today's presentation that are not based on historical facts are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements. We encourage you to read the risks described in our SEC filings on Form 10-K for the year ended December 31, 2020.

1:42 Except to the extent required by applicable security laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that we make here today, whether as a result of new information, future events, or otherwise. Today's presentation will also include references to certain non-GAAP financial measures. We reconciled the comparable GAAP and non-GAAP numbers in today's press release, as well as the supplemental tables in the back of the slide deck. And with that, I'll turn the call over to Todd. Thanks, Matt, and good morning, everyone. I would like to start by thanking our CEQA employees for their dedication and contributions to ensure we continue to deliver for our stakeholders. We would also like to thank our suppliers and partners around the world for helping us to navigate these challenging times. We appreciate all your efforts.

2:29 Before we discuss the quarterly results, let me also welcome Ramesh Noogahalli to our leadership team as SECO's first Chief Operating Officer. Ramesh is a proven executive with significant experience driving high performance businesses. Ramesh has been an executive general manager for several leading industrial companies, including international assignments in the Middle East and Asia Pacific. Additionally, Ramesh has helped to create and execute growth strategies and M&A activities at the corporate and business unit level. It's great to have him on the team. Now, please turn to slide three as I will highlight the key financial results for the first quarter. Building off the momentum from the fourth quarter of 2020, we started 2021 strong. As we stressed in our last earnings conference call, it was critical we start 2021 with a solid bookings quarter. We did that and more.

3:24 Orders were $92 million, up 22% year-over-year. We will discuss the details of our orders in a few minutes, but we are pleased with the balanced contribution for many of our businesses and end-market momentum. Sales were down 11% year-over-year as our $72 million of revenue reflected the lower starting backlog position we had entering 2021. We expect sales to pivot towards growth in the second half given our backlog is back above $200 million after our book to bill was approximately 1.3 times. So it is great to replenish our backlog and turn towards revenue growth. Q1 gross margins were 33.9% which were down approximately 120 basis points on project mix.

4:12 We continue to see very good project execution and are pleased with our margin levels given how challenged 2020 was from a bookings perspective. Adjusted EBITDA was $6.4 million in the quarter, down approximately $1 million, but reflecting a strong conversion to sales. This demonstrates the important work we have done to streamline our SG&A costs. Adjusted earnings per share of $0.09 was down year over year, but again, we were coming off a tough year as the COVID pandemic slowed our 2020 growth, and so we started 2021 with a lower backlog. Free cash flow was another major highlight in the first quarter at $9.4 million, just an outstanding start to the year. While our cash flow generation can be choppy from quarter to quarter, we continue to be confident we will generate excellent free cash flow in 2021. Now, please turn to slide number four.

5:08 For several years, we have communicated SECO as three segments, energy, industrial, and fluid handling, or PUPS. But the fact is, Seco is really a collection of leading platforms that provide our customers with engineered systems or industrial process solutions to solve complex challenges in their operating environment or to protect the natural environment. No doubt certain projects are aligned with various end markets such as energy, but overall we can and do sell engineered systems beyond the energy sector in our historic consolidation of the results. In fact, we continue to see new demand for various systems in water treatment and other areas that are outside the core energy segment. As such, we are retiring the segment names energy as well as industrial air and fluid handling. Instead, going forward, we will refer to these segments as engineered systems and industrial process solutions. This broadens our thinking with respect to market opportunity and removes the external view that we have energy-only products in our largest segments.

6:15 Within these two segments are well-established business platforms that serve as leaders in emission management, air pollution control, noise and vibration management, separations technologies, and so on. This is how our customer buys and how they recognize Seco Environmental as a leader, not as an energy company per se or fluid handling, but instead a solutions provider to solve their most complex challenges in environmental or industrial process areas. As we roll out our strategies in the coming months, we will articulate our focus to steadily build on our leadership position and advance in adjacent industrial markets. These platforms are structurally in place today, and we are prioritizing growth initiatives, both organic and inorganic, for each. When we articulate a major project award in the rapidly growing electric vehicle arena, which is a real example of some of our orders growth so far this year, It is important to understand it is within the air pollution control arena. Similarly, a recently announced multi-million dollar project award to supply our leading arting noise abatement solutions may be associated with the energy markets, but it really extends beyond historic energy segment alone.

7:28 We are helping to provide grid stabilization solutions to support renewable energy sources. As we think more broadly about investments to advance our leading platforms, we expect to find adjacencies and growth avenues. I expect our platform leaders need to and will think aggressively about their markets and where we can invest for more growth. And I want them to challenge their teams to think beyond their traditional markets and look for adjacencies and new opportunities. It's all about growth. It's all about sustainable growth. I will now turn it back over to Matt and he will provide more detail on our financial results and key metrics. Then I will conclude with some final comments. Matt? Thanks, Todd. Start with slide six and orders.

8:14 At 92 million of orders, we are pleased to see balanced growth year over year and sequentially for the second straight quarter. Several end markets that have been stalled since this time last year have reemerged as of late. I'm even more excited for our prospects as we progress throughout the rest of 2021. Our sales pipeline continues to expand and has crested a $2 billion watermark. That's up from the $1.9 billion pipeline communicated in March. Our markets are healthy and growing. In addition, we keep pushing into new markets. Just this past two months, we've been on a power plant in India, battery plants in Brazil, and a new electric vehicle production plant in the U.S. It's exciting for me to be talking about growth once again. In Q1, engineered systems booked $56 million of orders, up over 35% versus its trailing 12-month average, and more in line with 2019 levels.

9:08 This is a good indicator that our end customers are loosening their CapEx budgets. Most notably, our Amtrow Buell SEC Cyclones business booked $16 million in Q1, which is the highest level since Q3 of 2019, with $20 million, and prior to that, in late 2018. The pipeline for Asia-Pacific refinery projects remains strong, while European and U.S. markets remain subdued. As stated several times prior, this business isn't a matter of if it will come back, it is when. Deferring maintenance capex on our products has downstream repercussions. We are very optimistic about our future here. Our shorter cycle businesses, Industrial Air and Fluid Handling, both printed their third consecutive quarter of orders growth. Air pollution control solutions were up 8% sequentially as we continue winning more jobs in the growing bed can, and as Todd highlighted, the EV production end markets with best-in-class oxidizer solutions.

10:09 Fluid handling continues to outgrow its peers on solid performance with 28% sequential growth. This quarter, the growth was led by our Mefiag branded filtration products that also has exposure to the EV automotive markets. On the pump side of fluid handling, we are really hitting our stride. As our traditional markets of aquaculture and midstream oil and gas remain soft due to COVID, We're branching out in a new end market in regions of the world. If you follow our social media feed, you would have recently seen we've added partners in Canada and seeking additional partners in Europe, Africa, and Pan-Asian countries. The investments we've made in our pumps facilities have shrunk lead times below the competition and nailed on-time delivery at 99%. We are ready to grow and we're pushing our own boundary limits. Here again, I'm excited for the future.

10:58 Flipping to the right, revenue was down $11 million, or 13% sequentially, purely on lower starting backlogs in our long-cycle engineered systems segment, highlighted in blue. This volume decline came as no surprise considering our negative book to bill in prior periods. On the other hand, our industrial short to mid-cycle businesses, highlighted in green, grew revenue sequentially just not enough to offset engineered systems. As for our short cycle metric, introduced last quarter, we were happy to see modest growth to 17.6 million, up 4% sequentially on pumps and filters. On a year-over-year basis, short cycle was down 11%, primarily on fewer on-site installation and commissioning projects. These are typically duct and ventilation jobs, led by our Kirk & Bloom brand, that has seen customers restrict vendor access to their facilities to maintain their COVID protocols.

11:52 As a reminder, short cycle sales turn in four months or less, have aftermarket or recurring revenue features and gross margins well above average. Introducing new distribution partners, our recent analytical services team, and new clamped together ductwork are steps towards growing our short cycle revenue. We believe that a higher mix of predictable revenue versus project revenue will be a core element of our capital allocation strategy. Todd will provide some more detail as to how we are thinking about this next. To wrap up this slide, all signs point to growth. Long and short cycles. As we turn the corner towards the second half, our pipeline will turn to orders and backlog will convert to revenue. We look forward to half of our half growth. Most investors should recognize page 7, where we break out our orders by end market.

12:42 Same information, just a slightly different format. I'll use this opportunity to elaborate on a few of our end markets and how we see them flying out. Industrial air markets remain robust as U.S. manufacturing continues to expand and corporate social responsibility pressures companies to exceed emissions requirements. A Biden infrastructure bill would certainly serve us well as our air pollution control technologies protect employees and their neighboring communities. Thermal power generation markets improved with new capacity being added in the U.S. and Europe, but on a TTM basis, they are still down 22%. Market pundits suggest that the market is sitting at around 25 gigawatts annually and expects this to rise to 30 over the next 18 months. Nat gas as a feedstock remains cheap and gas turbines are still the fastest, most economical means of powering the grid. We believe that as electricity demand continues to rise from summer 2020 levels, we will see an increase in new project awards.

13:41 For midstream oil and gas, we track gas consumption fairly closely, and for 2020, the EIA reported a 3% decline versus 2019 and anticipates flat to down 1% to 2% in 2021. Our focus for these products has been growing our position in water and wastewater separation, which has a greater near-term opportunity for growth. Briefly, on slide 8, our backlog sits at $203 million, which is up 11% sequentially and down only 3% year-over-year. Our book to bill was a fantastic 1.3 times, breaking a sub-1 drought of five consecutive quarters, which is largely a result of the pandemic's impact to our end markets. Our commercial pipeline grew from the last time we updated investors to now $2 billion, as measured in a 12-month window.

14:30 As we look to our 18-month window, our prospects are even greater and growing. To say the least, it's an exciting time to talk about growth. Let's turn to slide nine. Our gross margins bounced back to 33.9% in the quarter, which is up 230 bits sequentially, but down 130 bits year over year, with mix of short cycle and large engineered systems jobs driving the decline. As we look at our current backlog and read the market, we, like our peers, are seeing modest commodity inflation, most notably in steel prices. Expecting increases, we've been vigilant to protect profitability. We've increased prices where most applicable, and we've shrunk the window of customer quote validity to protect against project margin erosion.

15:15 We feel good about the tools we have to monitor and react as this plays out in the coming quarters. I'll keep you updated on how we progress. As for non-GAAP operating income and adjusted EBITDA, both moved south as volume declines were offset by SG&A reductions. As Todd will elaborate on further, our cost structure is the lowest it's been in five years, and investors should rightly see that with continued market tailwinds, the operating leverage that our business model provides will be very productive. We firmly believe that as our backlog begins to grow and we continue to execute with our more efficient and streamlined cost structure that we will achieve full-year EBITDA margin rates of greater than 13% in the next few years. Slide 10 summarizes the quarter in total. A few quick highlights.

16:00 First, with revenue down 11% and EBITDA down only 13% year-over-year, our decremental EBITDA margins were strong at 12% year-over-year. Despite lower volume, our proactive operating expense reductions positioned our EBITDA to be 1 to 2 points above our 2017 cyclical trough in revenue. Operating leverage is a big upside for SECO. GAAP earnings per share was $0.03 in the quarter and down $0.07 year-over-year, and on a non-GAAP basis, EPS was $0.09 and down $0.06 year-over-year, both primarily on volume offset by cost. As was 2020, we continue to project 25% non-GAAP effective tax rate heading into 2021. Moving to slide 11, we outperformed on cash flow in the quarter.

16:45 On the left side, trade working capital decreased sequentially by $6 million, primarily on solid customer collections. but also bolstered by better upfront billings that comes along with a growing backlog. As outlined last quarter, when backlog is growing for SECO, customers are typically paying us early. On the right, you can see we generated nearly $10 million of cash flow from operation and invested $500,000 in capex to arrive at $9.4 million of free cash flow in the quarter. This is the best performing quarter since Q4 of 2018 for SECO. Hats off to our sales, project management, and finance team for responding to the call for action last quarter. Briefly on slide 12, our balance sheet remains healthy. We've paid down $3 million of debt in the quarter to arrive at $71 million. Our bank-defined leverage ratio is relatively flat at 1.9x, and our net leverage sits at 0.8x with approximately $55 million of capacity available.

17:39 As the backlog starts to convert in the second half, our capacity will expand, providing opportunity for Bolto and M&A to advance our environmental mission. I'll conclude with I'm proud of the team for an excellent quarter. It's nice to be talking about growth over cost once again. I'm excited about our second half and even more excited about executing on the strategy ahead of us. Todd will elaborate on that further. Todd? Thanks, Matt. Let's move to slide number 14. We are rebuilding our backlog and expect a return to revenue growth in the coming periods. Our pipeline of opportunities is near $2 billion, and we expect to build on the momentum that has helped us put up several quarters of orders growth. and as both Matt and I have highlighted, our growth is balanced across most platforms and in markets. We have a number of key organic initiatives across our business platforms and we are working to prioritize ones with a combination of highest impact in best markets.

18:33 And with our healthy balance sheet, we will be clear and purposeful around areas we will focus our capital allocation to steadily transform our portfolio into one with more short cycle sales and a higher blend of industrial revenue mix. The financial targets we have articulated over the past few years remain in place, but we will update them as we progress to our execution. The key is that we will have a focused set of prioritized platform initiatives as well as an equally focused capital allocation approach. Now please turn to slide 15, which we included to demonstrate our structural benefits as we turn to growth. Simply put, we have a more streamlined cost structure and far less complexity too. Reducing headcount and tackling ERP system consolidations is not easy. It has been a steady process.

19:21 But over the past few years, and somewhat accelerated in 2020 because of the COVID pandemic, we have established a cost structure that we expect will translate into strong EBITDA and EPS expansion over the next few years. A greater than 20% reduction in headcount since 2017. A 65% reduction in ERP and additional system complexity. All this translates to greater than $10 million annualized reduction in SG&A and a baseline for real earnings power. I appreciate all our SECO employees that have rolled up their sleeves and helped to transform our organization into one poised for higher margin growth. Let's wrap up with slide 16. A great start to 2021. Thanks to Team SECO for continuing to focus on our customers while navigating the challenging work environment brought on by the pandemic. While things are improving in many areas, it remains a challenge and our thoughts are with the millions of individuals still impacted by the terrible pandemic.

20:22 Our end markets continue to improve overall, and our sales pipeline has never been larger. Our strategy progress has brought clarity to our initiatives and focus areas. And we continue to make the right progress with our ESG initiative, which will result in our first ESG report in short order. We have a cross-functional team of leaders compiling our ESG data, policies, and other materials and have outside resources helping us put together a great foundation of information and targets. And with that, we thank you for your support and interest in SECO and we'll open the line to questions. Operator? Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then 1 using your touch-tone telephones.

21:10 If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and 2. Once again, that is star and then 1 to join the question queue. We'll pause momentarily to assemble the roster. And our first question today comes from Samir Joshi from H.C. Wainwright. Please go ahead with your question. Thanks, Todd. Thanks, Matt, for taking my questions. So just looking at, and first of all, congratulations for the nice bookings there. If I just simplistically add the bookings over the last four quarters, they amount to around $340-plus million dollars.

22:02 and then remind me of your timeline of longer-term projects and how do you see this converting into a 2021 annual revenue of 340 or what is the expectation there? Yeah, thanks and morning. It was a good quarter of bookings. This is Todd and I'll start. answering and then I'll hand it over to Matt to provide additional detail. So on the longer term projects, which makes up a bulk of our bookings that go into backlog, those generally start to turn into revenue in around six months. We'll get some upfront revenue potentially depending on the type of project sooner than that, maybe even within the first quarter, but the majority of the revenue starts you know at around the six month mark and rolls out to you know 12 to 18 months depending on the duration of the project so but a bulk of the revenue if you look at sort of a bell curve is between 6 to 12 to 16 months on the shorter cycle obviously which is you know 20 you know 25 percent of our revenue those those turn from if they do go into backlog as a booking They'll turn into revenue in the quarter, in the 30 to 90-day timeframe. Matt?

23:20 Yeah, you nailed it. Second half in Q1 of next year looks good based on bookings here. Continued growth in our pipeline sets up for another quarter of good orders, and that continues to roll forward. So Todd talked about it perfectly. Oh, okay. Okay. Was this increase mainly from the order that you announced in March from Arding from Netherlands or was there other contributions that were significant as well? That order was specific in the gas turbine exhaust business where we came up with an optimized solution to help stabilize the grid. We're excited about what we did from a technology perspective. I wouldn't say that was anything abnormal as far as size goes in the $92 million that we printed in Q1.

24:06 Understood. Just moving to SG&A specifically, it was up, of course you have done a good job to bring it down, but it was up sequentially. Was it mainly because of non-cash items or was there anything specific that caused this uptick a little bit? Yeah, I'll let Matt handle the details, but I think most companies see a sequential increase, not all the time, it depends obviously, but But for us, a lot of the sequential increase were certain things that are associated with either health care, incentive compensation, just in terms of how we're accruing for the year. Obviously, time will tell on some of those items in terms of how they flush out.

24:51 Stock Comp Expense, things of that. I wouldn't call them one time in nature, but they're periodic in the sense that it's not like we increased our headcount or our corporate cost per se. It's more how we're accruing for certain expense items when we start the year versus how we finish the year. Yeah, and I think that might be the answer. That's it. You have variable incentive comp that was basically zero at the end of Q4, and obviously we started accruing for that in Q1. Healthcare expenses that didn't exist in Q1. for coming back in Q1, tax expenses associated with employees, things of that nature, Samir. I think it could be helpful. We continue to believe that our, if you want to call it current, normalized SG&A by quarter is somewhere between the $18 and $19 million range. So if it goes a little below or a little above, those are typically going to be in-the-period adjustments or accruals that we may be adjusting in terms of as we go through the year. But I would try to be helpful in that way.

25:50 Got it. And 18 to 19 million is on a GAAP basis, right? That is on a GAAP excluding stock comp and appreciation. Got it. And then just last one, but trying to juxtapose two items that were highlighted. One in the press release about some more clarity on diversified industrial markets. And second about the M&A expertise that Ramesh brings to the table. Should we read something into that or what should we expect in mid-2021? Yeah, I think, look, we've been somewhat consistent over the past few quarters as we've provided external commentary and that we're excited about the organic opportunities within SECO. We think our end markets are healthy and continuing to get healthier. Obviously, there's still a little bit of uncertainty in the market out there in terms of The recovery from the pandemic.

26:50 But our balance sheet is in a good place. Our cash flow generation obviously in the first quarter and we expect for the year is going to be strong. and we'd like to continue to evolve our portfolio to include a balance of industrial businesses that we think fit really nicely in our environmental and industrial theme as well as businesses that can provide more short cycle revenue for, again, revenue mixed balance. So yeah, I think you can look at us adding a great operating leader for our organization as we're currently built, but somebody who understands and can help us strategically identify businesses that continue to provide an even healthier portfolio mix. Got it. That's all I have. Good luck with anything else.

27:39 Thank you. Have a good day. Once again, if you would like to ask a question, please press star and 1. Our next question comes from Bill Desalem from Keaton Capital. Please go ahead with your question. Thank you. That's Tietan Capital. Let me start relative to bookings and order activity. Would you discuss the pattern of that activity level over the course of, say, the last six months? I'm really thinking starting in November or so and kind of bring us up through April. And I guess you're welcome to talk about the first six days of May if you'd like.

28:25 We don't have a lot for you, Bill, on the first six days of May, but let me say, look, I think it's been an interesting year plus with everything that's gone on in the global economies and pandemic-related impacts. Q3 for us was a turning point, I think we'd say, as we closed the book on Q3. And as we were navigating Q3, we were seeing We were starting to see our pipeline, our future orders really start to move up, but we hadn't booked those orders yet, and we were still interested and concerned a little bit about when those projects would be authorized and released so that we could. You saw in the fourth quarter, and now you've seen in the first quarter, two really good sequential periods of orders growth, and I think that the intra-quarter and all of those trajectories are healthy.

29:23 We're always a bit back-end loaded like a lot of larger project companies are that the third month of the quarter defines the quarter. But I would say that what we feel really good about is the engineering work that we're still getting which is an indicator of these projects are starting to be let, the CapEx is starting to be released because we're being asked now to not only bid on projects but start to do some advanced engineering work That continues to be sustained across a couple of key end markets that have energy exposure, but also just broad industrial exposure. I'll let Matt also talk about anything that we're seeing in terms of the analytics to kind of answer your question from that momentum. Yeah, if I just go back to Q3, Bill, I would tell you that we are very back-end loaded, so a lot of orders come in the last few weeks of a quarter. But a good...

30:20 You know KPI for us is also the first 45 days because you've created a solid base and I would say that if I look back at Q4 you know October or the first part of November was starting to get a lot stronger than the first part of even Q3. When we wrapped up Q1 of this quarter just now the first 45 days were stronger than the first 45 days of Q4, and I'll tell you that as far as April goes right now, what we haven't released or anything there, the first month of Q2 is stronger than the first month of Q4 and the first month of Q1. So again, that goes back to our pipeline and our conviction about growth right now. That's quite helpful. Do you have any markets that are either lagging Not because of cycle time, but just the activity level simply isn't there.

31:16 And conversely, do you have any markets that are just true standouts that are stretching out beyond the others? Yeah, so I would say just on a sort of an end market perspective, have exposure there. That continues to be really the only market that we would say of substance, if you want to say, broadly speaking, what market. That's the market that we would say is still soft. There's, you know, capacity in that market that, you know, is still, there's some supply, you know, that's oversupplied. And I think that that, however, is starting to turn, and we're seeing those numbers and we're feeling good. Now, there can be some spot projects in that that we're excited about that for us make our orders potentially look good in the future, but that's the market that we're sitting in right now that we would say is really the only soft one.

32:11 And, Todd, I'm going to have to ask you to repeat that. I'm not sure if your phone cut out or mine, but I heard everything but the market that you're referring to. Midstream. Midstream oil and gas. I'm sorry if we cut out. Yep. Okay. Thank you very much. And... and congratulations that April is starting stronger than the last two quarters. As a result of that, we'll expect orders over 100 million in the Q2. You know, we're hopeful as well. That would be fantastic. But what we do like is the balanced health across all of our segments for the most part. And that's important to us. It's not just one or two areas. It feels like we have quote unquote a lot of options if you want to think about who we're passing the ball to around the field. We have a lot of open receivers and so we hope to advance from Q1, but time will tell.

33:04 Great, thank you. And then because we are reasonably new to the story, I don't have the perspective on the last time that you had orders of 92 million or greater. Do you have that off the top of your head? I know it's longer than the five quarters that you have in your presentation. Q3 of 19 and Q2 of 19, we're both over. Great, thank you. And then lastly for now, Ramesh, congratulations on bringing him in as Chief Operating Officer. What is his initial focus within the business? There's no shortage of things that are going to be added on Ramesh's list of duties, but I can tell you one is we are excited about continuing to advance our growth profile and ensuring that our platforms, as we sort of articulated here, which is how our customers buy from us, how they see us as leaders in this space solving complex problems, it is ensuring that each of our platforms has the right short- and long-term strategies to maximize their growth and profitability.

34:17 Okay, so I could interpret part of that answer as focused on acquisitions, and the other part of the answer focused on making the existing business more profitable. Did I hear that correctly? And if so, would you be able to put one in front of the other? I would say strongly one is Ramesh's focus on operational and organic strategies. with certainly bringing a lot of seasoned expertise around areas where we may be able to fill gaps in our growth profile or even profitability profile with small acquisitions that we could add to our core. And Romesh's focus is going to be on that, you know, continuing to drive our operational strategy, which is, again, mostly focused on propelling our core businesses organically.

35:11 While I think it gives us myself, Matt, and others the added time to think about our portfolio more broadly and also really dive deep into the best growth opportunities within our current business. Great. Thank you both and congratulations on the really nice orders. Look forward to seeing those turn to revenue. Thanks, Bill. Have a good day. Once again, if you would like to ask a question, please press star and 1. And ladies and gentlemen, in showing no additional questions, I'd like to turn the floor back over to management for any closing remarks.

35:58 Great. Thanks again, everyone, for your interest and your support with SECO. We're excited how we started the year as we've articulated in the last couple of earnings calls Our ability to start to replenish our backlog is critical. Our strategies around market growth and expanding into new segments and new services, we're excited about the traction that we're getting. We look forward to the upcoming quarters where we hope to be continuing to sustain this orders growth but also start to turn to meaningful revenue growth and margin expansion. So with that, We look forward to speaking with you again soon. Have a great rest of your day and week, and we hope everyone stays healthy. We'd like to thank, again, the SECO team for all the work that we're doing to deliver for our customers and stakeholders. Thank you.

36:52 Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending. You may now disconnect your lines.